A History Lesson: Looking Back at the Past Half-Century of the U.S. Economy and Markets

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The past few weeks have seen major stock market indices hit new record highs, with the widely watched Dow Jones Industrial Average crossing the 27,000 barrier for the first time on July 11 while the S&P 500 flirted with 3,000. In addition, the U.S. economy set a new record this month for the longest expansion on record: 121 straight months of growth and counting.

At the same time, however, there are some potentially dark clouds on the economic horizon that have some people questioning how long the good times can keep rolling. Chief among them are the ongoing trade war between the U.S. and China, the tariffs that have been assessed by President Trump on a wide range of imports from various countries, and signs of a global economic slowdown.

As an investor, it’s important to view economic news and developments like these from the proper perspective. You generally shouldn’t get too excited about new stock market highs or GDP growth records, and you shouldn’t get too worried about things like tariffs and trade wars. Going to either extreme can lead to making impulsive, short-term decisions that could negatively impact your long-term financial goals.

One way to put recent economic developments into perspective is to take a look back at the history of the U.S. economy and investment markets. Following is a decade-by-decade recap of some of the highlights and lowlights of the economy and markets over the past 50 years.

The 1970s: Disco Balls and Sky-High Inflation

In 1970, the S&P 500 Index stood at 90, with earnings of $33 per share. The ‘70s were a volatile decade socially and politically with Watergate, the ongoing Vietnam War and police shootings of student protesters on the Kent State University campus. 

And they were a rough decade for the economy and financial markets. Inflation ran at about 6 percent, compared to a current annual inflation rate of just under 2 percent. Between 1970 and 1979, the Dow Jones Industrial Average gained just 4.8%.

The 1980s: “Morning in America” and a Long-Running Bull Market

In 1980, the S&P 500 Index stood at 110, with earnings of $44 per share. Ronald Reagan won a landslide re-election in 1984 by claiming that it was “Morning in America” as the country began to emerge from the financial, political and societal doldrums of the 1970s. A long bull market started in 1982, adding trillions of dollars of wealth to households’ balance sheets. 

Between August 1982 and December 1999, before the bursting of the tech bubble, the Dow Jones Industrial Average delivered a compounded real total return of 15% annually. During this time, the Dow rose from 770 to 11,750 — and increase of more than 1,400%.

The 1990s: Strong Economic Growth After a Shaky Start

In 1990, the S&P 500 Index stood at 340, with earnings of $41 per share. The U.S. economy entered a significant recession in 1990, which was a big factor in George H.W. Bush losing the Presidency to Bill Clinton in 1992. But after the recession ended in 1991, the ‘90s was mostly a decade of rising economic prosperity — despite some big shocks, such as the Asian financial crisis of 1997 in which some Asian countries’ currencies fell in value between 30 percent and 80 percent.

The nation’s GDP grew for 10 straight years between 1991 and 2001, which was a record for economic growth that stood until this month. Throughout the ‘90s, job creation was steady, inflation was low and the stock market surged as oil prices remained low and the economy benefitted from increased productivity due to new technologies like widespread adoption of PCs and growing use of the Internet.

The 2000s: Y2K, 9/11 and the Dot-Com Bust

In 2000, the S&P 500 Index stood at 1,425, with earnings of $73 per share. The 2000s started off with the big Y2K scare, which fortunately turned out to be a non-event. But the tech-heavy Nasdaq stock market started crashing in March of 2000, a long and steady decline that stretched all the way to October of 2002 and marked the dot-com bust.

In the midst of this was the terrorist attacks of 9/11, which resulted in another major shock to the economy. Later in the decade, the global financial crisis and subprime mortgage crisis led to the Great Recession of the late 2000s, which many economists considered to be the biggest threat to the global and U.S. economies since the Great Depression of the 1930s.

The 2010s: Emergence from Recession and Long-Running Bull Market

In 2010, the S&P 500 Index stood at 1,123, with earnings of $90 per share. The U.S. economy was finally emerging from the Great Recession in 2010, which marked the second year of the longest-running bull market in U.S. history that continues to this day. During this bull run, the S&P 500 has more than quadrupled in value, boosting the value of the stock market by nearly $18 trillion.

In 2016, Donald Trump scored perhaps the greatest political upset of all time, defeating Hillary Clinton for the Presidency. President Trump signed major tax reform legislation at the end of 2017 that drastically reduced individual tax rates across the board and lowered the corporate tax rate to 21 percent. He also began a massive deregulation effort that, along with the tax cuts, has helped propel further stock market gains and economic growth, according to many economists.

Keeping a Long-Term Perspective

This look back at the past half-century of the U.S. economy and markets serves as a good reminder that there will always be economic highs and lows, victories and setbacks, and good times as well as bad times. But through it all, the U.S. economy has remained resilient and the markets have delivered handsome returns for those who stayed invested for the long haul.


The commentary is limited to the dissemination of general information pertaining to Frontier Wealth Management, LLC's ("Frontier") investment advisory services. This information should not be used or construed as an offer to sell, a solicitation of an offer to buy or a recommendation for any security, market sector or investment strategy. There is no guarantee that the information supplied is accurate or complete. Frontier is not responsible for any errors or omissions, and provides no warranties with regards to the results obtained from the use of the information. Nothing in this document is intended to provide any legal, accounting or tax advice and Frontier does not provide such advice. This information is subject to change without notice and should not be construed as a recommendation or investment advice. You should consult an attorney, accountant or tax professional regarding your specific legal or tax situation.

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