Crystal Ball

November 09, 2022

The most difficult part of investing is the uncertainty. Investing requires faith in the future. But the future is unknowable. It’s difficult to have faith in the future. There’s no shortage of negative news. Plenty of reasons to hold off investing your money. This week you’ve seen headlines about a hot war in Europe, baby formula shortages, school shootings, a bear market, rising interest rates, rising food and gas prices, bottlenecked supply chains… the list seems endless. Maybe I’ll just let this all blow over first.

It makes it hard to consider investing. Optimism is needed in a world drowning in pessimism.

It would be nice to have a crystal ball. One that allowed you a glimpse into the future. A peek behind the curtain. Then you could know how this all turns out. The invasion of Ukraine, inflation, supply chain worries, etc. 

That would help, wouldn’t it?

You probably think so. I disagree.

Let’s pretend it’s 1996. You have a crystal ball and $10,000. The crystal ball is going to tell you about the next quarter of a century. You get a look into the future. A peek behind the curtain. You’ll use your newfound clairvoyance to determine whether you should invest your $10K in the stock market or keep it in cash. You get the benefit of seeing how it all turns out.

Here’s what the crystal ball shows you in 1996…

Given it’s the late 90s, you know people are crazy about this new thing called the internet. They’re furiously buying stocks in internet companies. It’s all a bubble. A massive bubble. It will burst as all bubbles do, and the NASDAQ will fall 78%.[i] It will take 15 years for the NASDAQ to make a new high.[ii] Fifteen years. Many of those companies will go bankrupt.

The fallout of the tech bubble bursting won’t be limited to tech stocks. It will begin what will become known as the “Lost Decade.” For a ten-year period, the S&P 500 will be down -9.10%.[iii] An annualized return of -0.95%/yr. Millions of investors will invest in the index of the 500 largest companies in America for a full decade. And they’ll lose nearly 10%. 

Terrorists will hijack planes on US soil and run them into buildings. Most notably, The World Trade Center in New York City. Within a few hours those twin symbols of America’s economic might will be smoldering piles of rubble. The first foreign attack on American soil since Pearl Harbor. Thousands die horrifically. Americans will not feel safe in their own country. Air travel will never be the same. America will be at war.

The war will last for multiple decades. Thousands of American soldiers die. After a few years no one knows why we still have troops in harm’s way. Perhaps it’s just to keep the defense contractors rich. It comes to an ignominious end. American soldiers retreating. Billions of dollars of weapons left behind for the enemy.

We will experience the worst economic recession since the Great Depression of the 1930s. It will come to be known as The Great Recession. You may have thought the US housing market is rock solid. Turns out it’s not. Mortgagees will default at rates heretofore considered impossible. Many of the economic problems were underwritten by the giant Wall Street banks. Two of those banks will fail. The others will stay afloat thanks to massive intervention from the federal government. Global credit markets will falter. For awhile, the public won’t trust the banking system. The stock market will be cut in half. And then some.

The economic cycle is a story of booms and busts. There will be a recovery following The Great Recession. One may expect such a spectacular bust would be proceeded by an equally spectacular boom. Not this time. The recovery will be one of the slowest on record. You’ve been accustomed to 3% GDP growth as a good economic year. Coming out of the bowels of the worst economic collapse since the 1930s, GDP growth will average only 2% per year for seven years.[iv] The unemployment rate will exceed 10% and will take a full seven years to finally drop below 5%.[v]

One presidential election will be decided by the Supreme Court. Another will be won by perhaps the most polarizing figure in US political history. A third election will be largely considered the most divisive in American history. A substantial portion of the country will no longer trust federal election results.

A virus will sweep across the globe. When you think of the word “quarantine” you think of movies. This will be real. A substantial portion of the global population will be quarantined. Economies will be shut down. People won’t be allowed to work. The government will send them money to stay home. In some places it will be illegal for people to leave their homes. The unemployment rate will be the highest since the Great Depression. The stock market will have its quickest 30+% drop ever. 

Oil prices will be over $100 a barrel on multiple occasions. They will also be -$37 a barrel at one point.[vi] That negative sign is not a typo.

You’ve read about inflation in textbooks. People who were spending money in the 70s remember it. Soon, everyone will have personal experience with it. Inflation will reach 8.5% on an annualized basis. By far the worst since the 70s.

That’s all just in the United States. Your crystal ball apprises you of future global events as well. Russia defaults on its debt. Greece goes bankrupt and must be bailed out by the EU. This begins a European sovereign debt crisis. Speaking of the European Union, Britain will surprisingly vote to leave. The United States will lose the title of fastest growing economy to China. A tsunami in Japan will trigger the worst nuclear disaster since Chernobyl.

If your crystal ball told you that, would you invest?

I don’t think you would. I wouldn’t.

I’ll keep my $10,000 under my mattress, thank you very much.

That would have been too bad.

$10,000 invested in the S&P 500 index on the first of January of 1996 would have grown to, over the following turbulent 25 years…


Sean Cawley, CFP®

Neither asset allocation nor diversification guarantee against investment loss. All investments and investment strategies involve risk, including loss of principal.

Content here is for illustrative and educational purposes only. It is not legal, tax, or individualized financial advice; nor is it a recommendation to buy, sell, or hold any specific security, or engage in any specific trading strategy. Results will vary. Past performance is no indication of future results or success. Market conditions change continuously.

This commentary reflects the personal opinions, viewpoints, and analyses of Resolute Wealth Management. It does not necessarily represent those of RFG Advisory, clients, or employees. This commentary should be regarded as a description of advisory services provided by Resolute Wealth Management or RFG Advisory, or performance returns of any client. The views reflected in the commentary are subject to change at any time without notice.

[i] YCharts, ^IXIC Fundamental Chart, Percent Off High, 01/01/2000 – 10/09/2002

[ii] YCharts, ^IXIC Fundamental Chart, Percent Off High, 03/10/2000 – 04/23/2015

[iii] YCharts, ^SPX Fundamental Chart % Change, 01/01/2000 – 12/31/2009

[iv]Yes, This Is The Slowest US Recovery Since WWII. Heather Long & Tami Luhby, CNN Business. October 5, 2016.

[v] YCharts, US Unemployment Rate Fundamental Chart, 01/01/2009 – 01/01/2017.

[vi] YCharts, WTI Crude Oil Spot Price, 01/01/2020 – 05/01/2020