Recent Bluestone Memos
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Season’s Greetings, Happy Holidays, Merry Christmas. Recently I heard an interesting Christmas greeting; have a cuddly Christmas. I guess that’s the best one for this Christmas of physical distancing.
The other day, Tuesday November 24th, in the morning, the popular U.S. stock market index, the Dow Jones Industrial Average, usually referred to as “the Dow”, crossed 30,000.
That’s an impressive milestone. And, it came as quite a surprise. Last April, when the pandemic was spreading around the world and the global economy was shutting down, it did not look like we’d be seeing 30,000 in 2020.
Let’s put 30,000 in perspective with some history:
100 years ago, 1920, the Dow was at 100.
70 years ago, 1950, it was at 200.
48 years ago, 1972, it crossed 1,000.
It began this century, 20 years ago, at 10,000.
3 years ago it crossed 20,000.
And on November 24th 2020 the Dow crossed 30,000.
That’s a wonderful history. From 100 to 30,000 in 100 years. That’s wealth creation!
But there’s another side to this story. A more challenging history.
Early 2020, as COVID-19 struck the world with a frightening force, the Dow fell 37% in just 5 1/2 weeks.
In 2007 the Dow fell over 50%, driven down by fear as the Global Financial Crisis brought the global economy to it’s knees.
And in 2000 the Dow fell 36% as investors were spooked by crashing technology stocks and corporate corruption. Remember Nortel, and Enron?
Up in the long-run, but often down in the short-run. That’s stock market history.
We expect to see the Dow cross 50,000, and then 100,000, and then 200,000. In our lifetime. And we expect to see the Dow drop 10 or 20% many times, and even 30 or 40% a number of times.
It can be quite a mixed experience; frightening and frustrating, yet gratifying and enriching.
Here’s an all-important question: Why does the stock market go up?
An economic model was developed in the late 1700s. We call it the Industrial Revolution. It started up a wealth creation machine like the world had never known. As the global economy grows, corporations earn profits, and growing profits makes these corporations more valuable, pushing the share price up on the stock market. It’s really quite simple, economic growth and corporate profits drive the stock market up.
If our read of the world is correct, this economic machine is going to keep on running for a long long time. In fact, sometimes we wonder if the greatest period of wealth creation is right ahead of us. America is messy, but it’s robust and dynamic. China has huge problems, but they may very well keep growing. India and Africa are rising giants. And there are a lot of smart people in Canada. We have vast resources on many levels, and we have a strong national foundation. Canada may emerge as a world leader.
Have a sound financial plan. Have a sound investment strategy. Invest with experienced and proven Portfolio Managers. Calmly secure wealth in the long-run. That’s what we want to do, along with you.
We wish you happy Holidays. In spite of the difficulties we’re all facing at this time, Merry Christmas.
Source for The Dow historical data: macrotrends.net
This memo was prepared solely by Terry and Patty Rempel who are registered representatives of FundEX (a member of the Mutual Funds Dealers Association of Canada and the MFDA Investor Protection Corporation). The views and opinions, including any recommendations, expressed in this memo are those of Terry and Patty Rempel. Bluestone Financial is a personal trade name of Terry and Patty Rempel.