Sedona Arizona


Do you remember 1970?

1970 is a few years (plus a few more) before I was born, so I had to look up some of the events from that year. Of note:

  • The Beatles officially disbanded after less than a decade as a band – still one of the most prolific musical acts in history
  • The Apollo 13 accident – which gave us the phrase, “Houston, we have a problem”
  • The first Boeing 747 takes flight
  • The first Earth Day is celebrated
  • The US lowers the voting age to 18

If you go back to some of the other major events from that year, we can draw a few interesting comparisons: high social tensions, government mistrust, foreign conflict, and even market volatility.

Which brings me to why we’re talking about 1970: as of the market close on June 30, 2022, the S&P 500 rounded off its worst first-half of the year performance since 1970. Mark it – the worst first-half in 52 years.

I spent a little time comparing price movement trend charts of the S&P 500 over 1970 and the first half of 2022. While I don’t believe history repeats, I do believe it often rhymes.

S&P 500 – 1970 (chart via Trading View)
S&P 500 – First half of 2022 (chart via Trading View)

1970 & 2022 similarities

First, a 4Q spike occurred in both prior years, followed by another spike in March of both current years. Both markets were trading around macro factors like oil prices, inflation, a prior period of loose monetary policy, and rising interest rates. The country was also moving through a period of high social tension and ugly politics.

1970 & 2022 differences

The market moves significantly faster now than in 1970, as it’s more accessible to the general public, institutional trading is significantly larger, and algorithmic trading programs didn’t yet exist. Neither did crypto or NFTs. Also, the prior two years looked nothing alike on the charts. 1968-1969 was choppy and the market was already heading into decline; 2020-2021 was mostly up and to the right until the tail end of 2021.

The market deceleration in 1970 took a little more than 8 months to reach a bottom, with the decline from peak to trough at around 24%. In 2022, we are entering the 8th month of decline and have seen a peak to trough of around 24%. To be clear, I’m not calling a bottom at the current levels!

The S&P 500 finished 1970 with relatively flat performance. As we officially begin the second half of 2022, my fingers are crossed.

There is opportunity

As I have written in other posts, this market has given investors few places to hide. It’s also given very few places to look for growth, let alone stability. Nevertheless, if we take a longer-term view, this could very well be an excellent buying opportunity.

It's better to buy when the market is down 20% than when it's up 20%.

Many individual stocks, mutual funds, and ETFs are trading at a discount in not only the price per share, also in other important fundamentals such as the price per earnings ratio.

The market at these down levels are full of opportunity. It’s better to buy when the market is down 20% than when it’s up 20%. This is a great time to re-evaluate your investment strategy, feelings around risk, and what your investments are built to accomplish.

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Author: Dale Shafer II, CFP®, APMA®, CDFA®

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