For those of us old enough, we remember the long gas lines and gas station signs indicating short hours and no gas.
Here is what happened:
“On October 19, 1973, immediately following President Nixon’s request for Congress to make available $2.2 billion in emergency aid to Israel for the conflict known as the Yom Kippur War, the Organization of Arab Petroleum Exporting Countries (OAPEC) instituted an oil embargo on the United States (Reich 1995). The embargo ceased U.S. oil imports from participating OAPEC nations, and began a series of production cuts that altered the world price of oil. These cuts nearly quadrupled the price of oil from $2.90 a barrel before the embargo to $11.65 a barrel in January 1974. In March 1974, amid disagreements within OAPEC on how long to continue the punishment, the embargo was officially lifted. The higher oil prices, on the other hand, remained (Merrill 2007).” Source here.
The market responded accordingly. The media did their usual thing…
Consider this: “If you invested $100 in the S&P 500 at the beginning of 1974, you would have about $277.02 at the end of 1983, assuming you reinvested all dividends. This is a return on investment of 177.02%, or 10.73% per year.” Source credit: officialcredit.org
- It’s difficult to predict the future. It’s next to impossible to determine what the market returns will be going forward due to some terrible news event.
- Fear drives bad decision making when it comes to investing.
- Investor, because they are human, have short-term memories causing them to react in the moment.