Is It 1970’s All Over Again with a Recession and Inflation? | News or Noise

Year over year, comparable numbers were impossible, commodity Inflation ran rampant, economic growth slowed and the consumer paused after spending furiously in 2021 leading to this headline across multiple media outlets. Here it is.
“The S&P 500 just posted its worst first half of a year since Richard Nixon’s presidency in 1970, and many investors worry it has yet to hit bottom.”

I’m Chris Perras, Chief Investment Officer with Oak Harvest Financial Group. And This is our investment team’s mid-week release when we examine a news item, headline, or story making the rounds from publicly available sources and ask, “Is it News or Noise?” for your money. This week’s topic is the stories about the historically bad first half returns for stocks and bonds that investors endured this year and the comparisons being made to 1970.

Yes, the data doesn’t lie. The first six months of 2022 were abysmal for stock and bond investors. We had low expectations for the first three quarters of 2022, but the markets even underperformed our “curb your enthusiasm” view for a volatility and correction-laden first half.
The widely followed S&P500 fell almost 21% amid expectations of high inflation and a hawkish Federal Reserve, whose rate-hike plans could push the U.S. economy into a technical recession. The last time the S&P 500 fell this much in the first half was in 1970. The data doesn’t lie. They do look similar year to date.

Back when Richard Nixon was President, In the first half of 1970, which was also a Midterm election year, inflation was running hot. Back then, the S&P 500 fell -21%. The first half 2022 was also down almost exactly -21% with high inflation.
However, back in the second half of 1970, the market reversed those big losses to gain +26.5% off the summer lows into yearend. The stock markets closed the year almost spot on flat for the wild ride of 1970 with high volatility all year.

In total, the market rose +44% from its halftime closing low in 1970 through its first half, 2nd quarter, 1971 top. This top was also up +14.5% higher than where the markets started 1970. This was during a period of high inflation, lousy politics, and global uncertainty. Sound familiar?

If you hear current strategists bringing up the comparison to the 1970’s? My purely data driven response would be,” Let’s hope so, new all-time highs on the S&P500 in early 2023 and more gains after that.” The history of the markets, and the final punchline is often left off these historically dire comparisons made on TV.

Are the reports of stock market declines for the first half news for your money? Of course they are. Are the analogies of prior decades in the past like 1970 news for your money? Possibly, but remember, always look behind the numbers and see if you are getting the whole story or if the very important punchline is being conveniently left off.

At Oak harvest, we think our clients are best served by us helping them plan for their future needs, instead of focusing on the past. The future is always uncertain and that’s why our advisors and retirement planning teams, plan for your retirement needs first, and your greed’s second.
Give us a call to speak to an advisor and let us help you craft a financial plan that helps you meet your retirement goals. Call us here at (877) 896-0040, and schedule an advisor consultation. We are here to help you on your financial journey into and through your retirement years.
I’m Chris Perras and from everyone here at Oak Harvest Have a blessed week.

News or Noise?. . .

News!