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What history tells us about investing through COVID

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I received a message the other day. It was a question for the Motley Fool Money podcast.

But, as I started to think about how I’d reply, I decided it was a topic that deserved a longer form treatment.

Here’s the question:


Hey Scott,

If you could send a message to your (not much) younger self, what would you say? 

(It’s been a bit tough for a young fella like me at the moment, I need you to pump me up a bit.)

I’ve been having a rough run over the past few weeks, (not just with the stock market) and it’s kinda thrown me off.

How can I push through, not just to make money… but to like be here for the long haul?



Zac, I hear you. I know how you feel. I’ve been there before.

Here’s my response — not just for you, but for anyone who’s feeling that way.

I’ve been doing this job for a long time.

I’ve been investing for a lot longer.

Which gives me an advantage.

See, time is a wonderful thing. It gives you perspective.

To be sure, you can get it from history. And that’s valuable.

But there’s nothing like actually living through events to teach you some lessons.

It seems strange to say, now, but at some future point we’ll forget most of the events of this current COVID crisis.

Of course we’ll remember the pandemic. We’ll remember those whose lives were lost and changed.

And we’ll remember the health, social and economic consequences.

But most of us will remember it almost in the abstract. And we’ll forget most of the detail.

Take political, geographic and economic circumstances of the past 40 years.

I vividly remember the 1987 stock market crash. When I recall it, my first memory is the awful reporting of stockbrokers literally jumping out of windows.

I remember people were worried. Scared. Frantic.

But I can’t really recall those actual feelings, I just know that they were there.

Fast forward to the crash. The stories of the NASDAQ’s soaring valuations before an almighty crash that took many, many years for that index to regain.

I remember it all. I owned a couple of Australian technology companies whose shares never recovered (they were bought out, merged or changed business operations).

But I can no longer recall the visceral feelings. I just have memories of feeling that way.

And the same in the GFC.

I remember hearing a radio report — perhaps on ABC Radio National, I think — of the mortgage stress and mounting foreclosures in the US. I remember my portfolio being hammered in the aftermath.

Again, though, the memories are clinical, as if looking at someone else going through them.

I’ll never give birth, and I don’t claim to know what it’s like, but I’m told the human body deals with labour the same way — of course women remember the experience, but apparently the mind dulls the strength of those memories, otherwise a second (and subsequent) pregnancy would never happen.

But I think there’s another reason for all of this.

In each case, while the events themselves are traumatic in the moment, our brains manage to subconsciously help us put those events into perspective.

There is the joy of motherhood, for example, and all of the aggregate experiences that make up the full picture, of which labour, though sometimes traumatic, is only a part.

Moving back onto ground I can write more confidently about (and with first hand knowledge of), the crashes of 1987, 2000 and 2008/9 are made less painful by the knowledge that the market recovered.

And by perspective.

Remember Grexit?

It was all the papers could write about for months. It was going to be a global economic armageddon.

Remember the PIIGS economies that were going to wreck Europe?

Remember Brexit?

Remember the Chinese ‘hard landing’ when the country was supposed to run out of foreign exchange?

For many of you, the answer to some of those questions will be a straight out ‘no’.

Which tells you something.

For others, the memory will be strong. 

So let’s delve into it. 

At the time, nothing else mattered. Anyone who was anyone was reporting on it, talking about it, and trying to work out how it’d affect their portfolios.

It’s worth noting a few things:

First, most of them didn’t happen.

Second, the one that did wasn’t the end of the world.

Third, the biggest economic calamity of the past decade, COVID, was a ‘black swan’ that no-one saw coming even weeks before it hit.

At the time, all of these potential or actual outcomes seem scary.

Humans always overemphasise current events.

And we struggle to see the bigger picture.

COVID is bad.

It’s terrible. It carries human and economic costs that are both awful.

And yet..

Without downplaying the impact, remember what’s happened since 1900.

We had two world wars, for starters.

Millions of people died. A tragic, unnecessary waste of human life.

In that context, the stock market is a trifle.

But, as a finance company, and as an investment adviser, it’s my job to remind you that the world, the economy and the markets rebounded incredibly from those seismic events.

That’s what I mean about history and context.

Could this time be different? Of course it could.

Is it likely?

I don’t think so.



Not just the history that says the market has always rebounded.

But also the history of smart, thoughtful, well-meaning people who kept saying it was ‘different this time’.

Steve Keen is still waiting, decades later, for his house price collapse.

We’re more than a decade on from the ‘sky is falling’ predictions of the end of ‘fiat currency’ (government-backed dollars, Yen and Sterling).

At the time, overwhelmed with ‘now’ and with not enough emphasis on either history or future, those people could only see the problems.

In hindsight, we know the fears were overblown and overly fixated.

I’m not going to downplay either the human or economic toll of COVID-19.

I’m not going to downplay the policy challenges confronting doctors, economists, business people or politicians.

I’m not going to be Pollyanna and refuse to acknowledge the problems and the risks.

But I am going to say, with the benefit of history, that I have a very, very high level of confidence that we will get through this.

We will deal with this.

That there will be tragedy and loss, but that we will overcome.

We got through two World Wars. Numerous other wars and conflicts.

We got through existential crises like the Cuban Missile Crisis and decades of Cold War

We got through economic crises like oil shocks, many recessions and a Great Depression.

In the last 40 years, we got through stagflation, the 1987 market crash, the Asian Financial Crisis, the crash, and the GFC.

You think this is the one that stumps us?

You think this is the one we don’t recover from?

You think this is how it ends?

Cool. You’re welcome to that view.

But good luck sitting on one end of the see-saw, with the weight of history on the other side.

The recovery will be bumpy. We’ll have setbacks. It’ll seem dark, from time to time, perhaps even often.

And there is no avoiding the awful human toll. COVID won’t discriminate. We will lose people, and we will lose jobs.

But the economy will recover. 

Because democratic capitalism is an unstoppable force.

Yes, that might be an article of faith, except that faith requires a belief in the unseen.

We’ve seen this movie before. We know how it almost certainly ends.

Stay the course, Zac. Keep your chin up.

Fool on!

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Motley Fool contributor Scott Phillips has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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