Whenever the stock markets go through a very rough period, it is inevitable that there is talk that this time things are different. I remember the tech bubble in the late-90’s when the “new economy” was going to change everything and the stock market was now playing with new and different rules. Valuations were irrelevant, as was company revenue and earnings. As long as the company was in the online space it was going to rule the world. Look what happened then! And here we are again with stock market pundits speaking of the changes that we are seeing in the markets and saying that this time, everything has changed. Credit and banking will never be the same again. Will it?
There has been something that I personally have been looking for for a long time. It is a representation of how the media plays things up and pontificates gloom and doom for the sake of magazine and/or newspaper sales. I have finally found it and it was prepared by O’Shaughnessy Asset Management, LLC. In this pdf file, they present a multitude of different magazine and media headlines during the different market cycles we have gone through. Without fail, the magazines present the various economic events as dire and dreadful. Sure, at the time they are. This credit and banking crisis we are currently going through is hard on everyone. However, this too shall pass and we will look back on it as just another blip in the stock market.
Here are a couple of examples of various magazine covers during a couple periods of financial turmoil:
Finally, the last image that O’Shaughnessy portrays is a chart of the S&P 500 and it’s rolling 12-Month returns. It is clear that the market does indeed have its ups and downs. This time will be no different in my opinion. The question we dividend investors must ask is, how patient and disciplined will I be during these tough times to continue investing based on my dividend strategy and my chosen asset allocation?