Considering my relatively young age of 31, it might surprise you that I have lived through not 1, not 2, not 3, but 4 “once in a lifetime” events that have affected the U.S. Stock Markets. While all four events were unique in their own right, they are a reminder that facing adversity is not necessarily unique, and may not be “once in a lifetime.”
When I was 1 years old, the “Oil Price Shock” was big news. The price for a barrel of oil spiked during this time period and created uncertainty that rippled through the U.S. Stock Markets. During the 1990’s we saw the first negative year in the S&P 500, -3.1%, after eight straight positive years!
When I was 10 years old, the “Dot-com Bubble” nailed the market. The enormous demand for anything with “.com” in the business name created a bubble around technology stocks. Unfortunately, we all know what happens to bubbles…they pop! When this happened, the U.S Markets declined for 3 years in a row! Between 2000–2002 the S&P 500 return was -9.1%, -11.9%, & -22.1% respectively. Ouch!
When I was 19 years old, the subprime mortgage crisis culminated in the “Great Recession.” We all remember this one! The imbalance between risk and reward created an environment where banks were lending money to anyone willing and able to sign papers. When this bubble popped, the S&P 500 recorded a -37% return in 2008. Again, ouch!
Now I’m 31 years old, and currently living through the “Coronavirus Crisis” from COVID-19. Luckily, I’m in a profession that can work from home, and work with a company willing and able to adapt during this crisis. Across the globe, schools, businesses, and social life have shut down while we witness history from the safety of our homes. At the time of writing this article, the S&P 500 has dipped roughly -14% for the year. If that number holds to the end of the year, that would make this only the third worst S&P 500 year since I was born.
While writing this article from home, I’m holding my nearly 1-year-old daughter in my lap. She is currently living through her first “once in a lifetime” market event just like I did when I was 1. Ironically, there is also an “Oil Price Shock” but this time, it is in the opposite direction. I don’t have a crystal ball, but if my 1-year-old daughter could understand me, I would tell her that this is not the first crisis to hit the U.S. markets, and it certainly won’t be her last “once in a lifetime” event. We have been through adversity before, and if history repeats itself, the U.S. economy will eventually rebound and continue to thrive.
Sterling J Searcy Jr | CPA
Senior Tax Advisor