Have you tuned into the news a bit more often as of late? Bad news tends to place pressure on us like some “super” gravity. So far, in just the 1st four months of 2022, we have faced the following headlines: stagflation, inflation, Russia/Ukraine conflict, soaring oil prices, rising interest rates, new COVID lockdowns in China, and the lead story at the top of news feed now is an “imminent” recession. As we always try to do, we want to provide you with some critical perspective.
Also, just to head off a question you may be asking in your head but haven’t quite yet verbalized, “Yes, we still recommend that you stick with your long-term strategy and diversified investment portfolio, regardless of recent scary headlines. This is not a time to hit the panic button.”
Here are a few facts that you will not hear from the mainstream media outlets:
- Just since 1980, there have been six recessions, an average of one recession every seven years.
- The longest recession was during the Global Financial Crisis. It ran for a year and a half, from December 2007 to June 2009; GDP declined 5.1% from peak to trough.
- The shortest recession was the COVID-19 shock recession. It ran from February to April 2020 and took GDP down by 19.2%.
- The average duration of the six recessions was 10 months, and the average GDP decline was about five percent. (Without the “Corona Crash”, the average GDP decline was a little over two percent.
The total number of months from January 1980 through April 2022 is 508. The total number of decline during the six recessions was 58. That is to say that during this period, the U.S. economy was expanding 88% of the time and only in recession 12% of the time. - According to the Federal Reserve, real (inflation-adjusted) GDP per capita in the first quarter of 1980 was 30,174. For the fourth quarter of 2021, it was 59,553. During these four decades, when the American economy experienced six recessions-every one of which was reported in the mainstream media to be “The End of Economic Life As We Have Known It” -U.S real GDP per capita DOUBLED.
We are not conceding that a recession will definitely occur in short order or that the coming months will be easy. However, for the long-term focused investors (which we should all be), we can use this bit of history to remind ourselves that this too shall pass. Storms subside, and calmer seas eventually emerge.
As Peter Marshall said, “When we long for life without difficulties, remind us that oaks grow strong in contrary winds.”
Thanks for reading.
Joel Malick currently maintains the Accredited Investment Fiduciary (AIF®) and Accredited Wealth Management Advisor (AWMA®) designations. Joel and his team at EverOak Wealth Co. recognize that running this race for the long term is one of the greatest challenges you’ll face in your lifetime. Thus, they combine critical planning and investment strategies with real-life perspectives. Their consultation is provided at no additional cost to Alliance 403(b) Retirement Plan participants.
