I’ve done a lot of reflecting over the past several weeks. Today my youngest son finished his last day of high school and tomorrow is his graduation. I vaguely remember my high school graduation. Though I was excited and happy to be starting a new chapter of my life, I had no real idea what the ensuing years would bring.

At times I worry about the state of the world that my young son is facing, but I also envy the opportunities and experiences that await.

Below I’ve included a chart of the S&P 500 going back to 1970–the year I started junior high school. It is a logarithmic chart to keep market movement in perspective through those decades. You’ll note that I graduated from high school in 1976–the year of our nation’s bicentennial. I spent the next couple of years in Iceland as a missionary where I got my first exposure to the variables of international currency and my first experience with inflation that exceeded a 100% annual rate.

 
By the time I graduated from college in 1981, I was smart enough to recognize that the U.S. economy was having serious troubles. Unemployment and inflation were both high. My wife and I paid $40,000 for our first home a couple of years later and our mortgage interest rate was 14%. I was managing editor of a small newspaper at the time and my fist investing experience was with a company 401K.

Although unemployment and inflation are currently much lower, that 1981-82 period felt a lot like what we are experiencing now. And a look at the chart shows similarities in the pattern (highlighted by the green lines), if not in the fundamentals. The big decline from 1973-1975 looks similar to the 2001-2003 period. The current downturn resembles that of 1981-1982.

The fall of communism in 1990 was significant to the U.S. markets and to me personally. I was at the time working for a company that had a contract with the government of the Soviet Union to teach principles of capitalism to Communist leaders. Over the next several years I got a firsthand view as the former Soviet Union transitioned to a free market economy. Along the way I watched as the Russian economy dealt with triple-digit annual inflation.

My career with the investment markets was renewed in 1995 when I began my present position with Strategis Financial Group. Since then, I’ve seen one of the strongest bull markets ever followed by one of the most severe bear markets.

Early in 2004 my two oldest children both got married within a couple of months at about the same time the market started the sideways pattern with is still ongoing. Making money in the markets has been a struggle since then.

I don’t profess to have a crystal ball that gives me insight into future market activity. My best guess is that the next 38 years will be similar to the past 38. There will be volatility that brings good times and bad. But for the immediate horizon, the economy and U.S. consumers will struggle because of the high cost of energy.

When I watch my son tomorrow as he takes another step along the transition to adulthood, I’ll keep my fingers crossed and hope that the ensuing years for him and his generation will be as good as they have been for me and mine.
F.S.

If you would like investment strategies that attempt to minimize risk but still provide the opportunity for solid growth, check out the offerings from Strategis Financial Group.  For information, call 800-279-3377.

You requested this MarketOwl free e-newsletter. Please add support@marketowl.com to your e-mail address book to ensure prompt delivery.