“The pain is being felt worldwide… Inflation in the U.S. is at a 40-year high…ordinary consumers are seeing prices go up everywhere, in energy, in food and in housing,” Nikhil Kumar, Deputy Global Editor of gridnews.com reports. “Fuel prices have been affected by the Ukraine War and have been feeding into the cost of goods and services worldwide…the Reported Social Unrest Index recently neared its highest levels since the onset of the covid pandemic.”

But, wait…there’s something familiar about all this…in fact, all these things are familiar—the war, the inflation, the economy, the politics, the societal unrest…We’ve been here before. One man who has been “here” before, in fact, more than forty years before, is Innovative Portfolio’s co-founder and Managing Director Dave Gilreath. 

40 years ago? Gilreath recalls…double digit inflation. 40 years ago? Interest rates in the teens.  40 years ago? High murder rates (actually double what we’re seeing today). Life expectancy 40 years ago? Far shorter than today. Poverty 40 years ago? Much more widespread than today.

To be sure, Gilreath concedes, 2022 has so far turned out to be nothing but a big bust on all counts, and, the talking heads almost never seem to follow the old Andrews Sisters advice about “accentuating the positive.” Bombarded with negative news, even seasoned investors struggle to keep their eye on the longer term goal. Pessimists focus on current problems, forgetting that those problems have always been with us.

While past performance does not guarantee, nor has it ever guaranteed, future results, Gilreath finds history to be a powerful tutor. Having been along for a longer than forty-year ride, he can hardly ignore the fact that, over the span of his own career, the S&P doubled no fewer than five times, continuing to reinforce his belief in the power of the American economic engine.

Viewing today’s stock market from a “valley” (even a “valley” so much higher than past “peaks”), Gilreath understands, investors can become acutely conscious of the ominous presence of sector-specific and company-specific risks cited by Andrew Beattie in a 2021 Investopedia piece, including commodity price risk, headline risk, inflationary risk, and interest rate risk.

The messy global stew of economic and geopolitical events, Gilreath admits, causes some equity investors to be paralyzed in fear. Their error in thinking, he believes, lies in tragically underestimating the power of the U.S. economic engine to keep pushing profits higher in the long term.