Though the stock market has turned upward a bit and inflation has begun to wane, investor sentiment among some clients remains as dismal as a trip to the dentist. Still holding a dour view of the market, they assume (probably incorrectly) that prospects for good returns this year are quite dim.
Never mind that the Nasdaq achieved bull status in mid-August, having risen 20% since June, or that the S&P 500 was up 14.7% during this period. Some clients, still emotionally bruised by negative headlines, just don't want to hear about it. After being exposed to recession-obsessed media for months, they're stubbornly pessimistic.
Such sentiments pose a vexing problem for advisors trying to persuade these clients to accept the strategy of taking advantage of still-depressed equity prices. How can advisors show them that their pessimism is counterproductive?
The answer may be to take them on a trip back into market history. Clients aware that history often repeats itself (or at least rhymes) might be interested to know that:
Depressing starts to a year have sometimes turned around completely intra-year, even in abysmal social, political and economic conditions.
In the first half of 1962, the S&P 500 fell 23%, but it increased 15.3% in the second half — and then rose 27% by mid-1963 and 46% by mid-1964. People are complaining about the sad state of the world today, with pandemic lockdowns continuing in China and the war dragging on in Ukraine, but let's look at things in the early 1960s.
Cold War tensions with the Soviet Union were at a peak (with schoolkids being herded in nuclear bomb drills), race-related riots abounded, a nasty recession had set in, unemployment was astronomical, the top marginal income tax rate was 91% and, in 1963, a popular president was assassinated.
And clients think we've got troubles now?
In the first half of 1970, the S&P 500 fell 23%, but rose 27% over the next six months. It then increased 36% by mid-1971 and 47% by mid-1972.
Were things better then than they are now? No way.
