LifeCycles vs. S&P 500
1957 - 2008
After the Dow Jones Industrial Average, the S&P 500 is the most widely followed index of large-cap American stocks and is considered a bellwether for the American economy. Presented as a permanent reminder, the chart shows the progress of the S&P 500 (black line) during a 51 year period overlaid on top of the four stages of life.
Depending on your age and circumstances, the financial crisis has had different degrees of impact. For retired seniors dependent on fixed income from investments that were over-exposed to the stock market, the impact has far greater consequences than for a person in their 30's.
We can see that during the first 30 years, there was by comparison a stable pattern of growth and progression that was sustainable and supportive to whatever stage of life you or someone you know was in during that time. Starting in the late 1980's, a major Sea Change in the character of the index started to unfold reflecting unrealistic expectations leading to unsustainable upsides, only to be followed by precipitous drops to the downside. The end result was that a vital and supportive link had been severed that once existed between the corresponding stages of life and the cycles of our underlying economy which we naturally rely on for relative stability and support.
Looked at another way, for the last 20 years we have been drifting into unchartered waters - not realizing that our perception was lagging or falling behind reality. We had unknowingly built for ourselves a massive house of cards on a foundation of sand that eventually met its unavoidable fate.
It is anyone's guess whether or not the stock market will return to a rate of progression that is more realistic, less prone to dramatic moves and more reliable in its relationship to the unalterable cycles of life. However, rather than wondering and waiting for others to figure things out, let's take the initiative and do the following:
- Re-examine some of our previous long-held assumptions to decide if they are still valid;
- Consider principles and standards on which we as individuals can establish a bedrock foundation that will support the life cycles, regardless of what the future may bring.
Michael E. Douroux
