On this day in 1972 the Dow Jones Industrial Average closed above 1,000 for the first time. The New York Times likened the event to the breaking of the 4-minute mile.
Yesterday, the Dow closed at almost 44,000. While the stock market has its ups and downs, over time it has always been the investment with the best return. Of course, no one is invested in anything for 90+ years, but here are the average annual nominal (not adjusted for inflation) returns for stocks, bonds and cash from 1928 to 2022, a period that includes the Great Depression, which was not exactly a good time for stocks. A disclaimer: the S&P 500 is used as the measure for stock prices/returns.
Stocks: +9.6%
Bonds: +4.6%
Cash: +3.3%
Obviously, in shorter periods of time bonds and/or cash can yield better returns than stocks. However, I firmly believe that no one can achieve financial independence by working for someone else 40+ hours a week and putting away a few dollars every month in a bank savings account.
Surprisingly to me, this Gallup poll from May of this year found that 62% of American adults have some type of investment in the stock market. I had always believed that percentage was only about half. However, except for a decline in that figure for the years following the Financial Meltdown of 2007-2008, that proportion has hovered around 60% since the late 1990s.
******************
Of course, at this time in 1972 Richard Nixon had just been re-elected President in a landslide over Democratic nominee George McGovern. We all should know how Nixon’s second term ended.
However, in early 1973 his approval rating reached 67%, according to Gallup. A year and a half later, in the wake of Watergate, that percentage had plunged to 24%. Believe it or not, that is not the lowest approval rating of any President since Gallup began its polling in 1937. Twice, Harry Truman’s approval rating sunk to 22% in the period between November, 1951 and February, 1952.
I think one example of the polarization of American politics is that no President has reached even a 60% approval rating in the last 15 years. Every President from FDR through Lyndon Johnson, even Harry Truman, reached a number of at least 79% at some point during their term.
******************
By late 1972, the American automobile was morphing into something with far less power than during the first Muscle Car era of 1964-71. The 1973 model year was upon us. Using a car with which I have some familiarity as an example, the Chevrolet Corvette, in the 1968 model year the base Corvette engine was rated at 300 HP/360 LB-FT of torque. Five model years later, those figures were 190 HP/300 LB-FT. Yes, some of the decline was due to a change in the way horsepower was measured, but much of the loss of power was simply due to changes in head design/compression ratio in order to meet new emissions standards.
One can confirm this picture shows a 1973 model year Vette as that was the only year the car had a plastic front bumper, but a chrome rear bumper. I doubt anyone could have foreseen that about 50 years later a Corvette would be available, stock, with more than 1,000 horsepower like the C8 ZR1. Again, engineers are smarter than bureaucrats.
As always, I welcome thoughtful comments. Thanks.
#ThrowbackThursday:TheDowJones