Here’s a history in eight doublings. Or, if you prefer, four double doublings:
1. 1927 was a bad time to start investing. The market halved in the first 1.3 years, and then did the same in the next 1.3 years, as the Great Depression took hold. It would be 27 years before your initial investment doubled in price. But then things kicked on, as the ‘nifty fifty’ boom got going and Warren Buffett returned money to shareholders on the basis of irrational exuberance, it took just seven years for the next doubling
2. Then another fallow period, including the inevitable bursting of that bubble, along with the inflationary trials of the 1970s meant it took 21 years for the next 2x. By then, Ronald Reagan’s supply-side reform was in full swing, and we were back to the go-go years, with four years the interval for the next double
3. Black Monday in 1987 slowed things a bit, but broadly the market maintained a march higher, taking nine years for its next +100%. There then followed the DotCom crisis, probably the biggest bubble any of us will ever see, and the market took a record-quick three years to double again
4. The next wait was another long one, being interrupted by the third halving, with the S&P lashed, first by DotCom deflation, and then by actual deflation in the Global Financial Crisis (GFC). Two times the DotCom high came 19 years after that peak, as President Trump’s business friendly agenda buoyed stocks. And this double’s double took less than five years, as a face-ripping Covid stay-at-home Tech rally morphed into the SPAC- and meme-mania of 2021.
There are more doublings than there are halvings. So don’t let your cynicism or perceived cleverness get in the way of returns. Equity bull markets describe an estimated 80% of history. When the market gets exuberant, it tends to get really exuberant. Doublings tend to come in pairs. But there can be long gaps between these pairs. Not only that, but the psychological impact of the halvings, or even just the long regimes of nothingness, can be profound. The Great Depression which led to the first two halvings, the nifty fifty bust and inflationary 1970s which led to the second fallow period, and the DotCom bust and GFC which led to the third divide-by-two all had outsized impacts on investor psychology, and arguably still do to this day. So, are you better off waiting for a crash before you invest? And related, are you then wise to take the money and run after a few winning hands? The short answer is no.
Originally posted here: https://www.linkedin.com/posts/activity-7252951570823188480-sRZB