Invest and Wait

Written by Doug Price (Wealth Management Manager, Mainstreet CU, Senior Wealth Advisor, Credential Securities)

In 1982 Wayne Gretzky scored 92 goals in a single season. This single-season NHL goal-scoring record remains intact after 38 years. Impressive. My parents told me to pay attention. “This will never happen again”. So far they have been correct.

The S & P 500 Index set an all-time closing high February 19, 2020, with a closing value of 3386 points. Today , August 18, 2020, this all-time high was breached and the S & P 500 Index closed at 3389 points. The previous record lasted 181 days or 49.58% of one year. This means the S & P 500 Index has regained all of the losses from the low points in March. It also means the S & P 500 has recovered from every pullback, correction or bear market in its 90 plus year history. To this point, there has been nothing that has been able to stop this measurement of wealth from achieving new highs.

Here is an interesting tidbit. Gretzky scored his 92nd goal of the season on March 28, 1982. The S & P 500 index closed on March 26, 1982(a Friday) at 111.94 points. The average annual return on investment in the S & P 500 Index over this 38 year period has been approximately 9.40%. If dividends were reinvested the total return works out closer to an annual average of 12%. During these 38 years, the S & P 500 set more than one hundred new closing highs. All have been surpassed. All an investor had to do was invest and wait.

Even more interesting, the S & P 500 set a yearly high of 31.86 in 1929, the year of the most famous stock market correction in history. This tells us someone with the worst market timing in history still managed to increase investment more than 100 fold, excluding dividends, just by sitting and doing nothing. If dividends are included the total return is greater than a 200 fold increase in value. Important to know the many investment options available to us today were not available in 1929 so these numbers are theoretical in nature. They do illustrate the best time to invest for the long term is when you have the money available and free to be committed for an appropriate amount of time.

So what do a hockey goal scoring record and the S & P 500 Index have to do with each other? Nothing. Absolutely nothing. The only possible commonality is the fact 2020 has provided us the chance to see the Stanley Cup playoffs begin in August and the market index achieves another new high watermark in the same month. I feel it is fair to say this is a spurious correlation.

Other than the above, the only thing I can think of is the old cliche about records being made to be broken.

I wonder which record will last longer, the S & P 500 record closing high of 3,389 or Wayne’s goal total of 92?

Disclaimer: Mutual funds and other securities are offered through Credential Securities, a division of Credential Qtrade Securities Inc. The information contained in this email was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete.