Decade in Review: 10 Years of Financial Turmoil

When it comes to money and the past 10 years, most investors are frustrated by the poor performance of the United States stock market. A dollar invested in the S&P 500 index 10 years ago would be about $.97 today, according to MeasuringWorth.com. To address that concern, I could echo the typical investment adviser and remind long-term investors that they are in it for the long haul and that, while the 10-year snapshot may look bleak, it is the overall return when you actually need to liquidate the investment that really matters.

However, that topic has been covered ad nauseum by investment writers, with everyone having his or her own opinion. Because really, no matter what the expert investment analysts say, no one can predict how the stock market is going to do over the upcoming 10 years, and the past year or so has proven that history doesn’t always repeat itself.

Instead, I’d like to review the various reasons behind the behavior of the stock market over the decade, including world events and changes in attitudes and information.

Since the year 2000, our world has changed dramatically. Thinking back 10 years, the Internet was just becoming available to the everyday person. The speed of information was at a snail’s pace compared to what it is today. The thought of carrying a tiny computer that gave you access to the Internet, e-mail and virtual maps at the touch of a finger seemed space age and decades away. How did we survive without iPods and text messaging?

It is in part due to this increase of availability of information that investing in stocks as we knew it 10 years ago will never be the same. That hot stock tip that could earn savvy and fast-acting traders millions in a couple days is now available to EVERYONE and within split seconds, important information that affects the price of a company’s stock is reflected.

We had Sept. 11, which closed the New York Stock Exchange for six days. Entire firms were wiped out in one day, such as Cantor Fitzgerald, which lost 658 employees in the World Trade Center attacks. Fear of a repeat attack was reflected in the performance of the U.S. stock market for years, as investors remained uncertain.

Martha Stewart went to prison for selling stock based on insider information, meaning that she acted on information that was not yet available to the public, allowing her to make an unfair profit.

Executives at Enron and WorldCom lost sight of their duties to run their companies with integrity and, in some cases, cost their loyal employees their life savings. Greed took on a whole new meaning, and with news now available 24/7, the whole world is instantly made aware of such indiscretions. Investors are unsure of which corporations will be around for the long haul.

The U.S. went to war in the Middle East. Interest rates have been at an all-time low multiple times. And the Great Recession still has many searching for jobs or new careers. These are just the headlines from the past 10 years, but they describe much of what contributed to such poor performance of the stock market.

All of these factors make it difficult for people to continue to contribute to 401k’s and other long-term savings plans, but I would advise investors not to give up or cash out yet. While I can’t promise that the next 10 years will be better, I still believe that investing in the stock market is the best way to earn a higher return on your money with the lowest amount of risk.

Here’s hoping that the second decade of the 21st century is better in terms of investment performance and that we all keep our sights on what is truly important: having something to believe in and something to live for BESIDES money.

Personal Opinion Disclaimer: This article represents the views of Kelley C. Long based on her capacity as a certified public accountant and her experience in the financial services industry. The opinions expressed are intended for educational purposes only and are not to be considered financial advice.

A version of this post was published in the Cincy Chic column “Cents & Sensibility” on December 21, 2009.

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