228 – Lessons Learned from the History of the Stock Market

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Lessons Learned from the History of the Stock Market

Learn about the repetitive cycle of past market crashes and recoveries over the past 50 years.

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One quote you may have heard before is that, “History is doomed to repeat itself.” Bob and Shawn take this quote to heart as they discuss the various times in history that the stock market has plummeted and then come back, thus repeating itself over and over again. They look at some of the most famous “crashes” of the last 50 years, break down their causes, and then discuss the after effects of the market.

Some of these famous events include:

• 1973-1974 oil embargo
• Black Monday in 1987
• And the market volatility during the COVID-19 pandemic

 

Despite significant market drops during these events, the past markets have consistently recovered and gone on to reach new highs in the following years or months. Bob and Shawn caution against panicking during market downturns and highlight the importance of staying invested through market cycles.

Mentioned In This Episode

Shawn (00:00):
So Bob, here’s a question for people who are following along with this on the markets. How much do the markets typically drop if nobody’s selling?

Bob (00:08):
I think that would be zero.

Shawn (00:11):
Oh, so really it only starts dropping if you have a bunch of people panicking and selling?

Bob (00:18):
That creates panic.

Shawn (00:18):
Yeah. Welcome back to Christian Financial Perspectives. My name is Shawn Peters. This is Bob Barber, and today we’re going to be doing history lessons of the markets. And in Ecclesiastes 1:9 it says, “What has been will be again and what has been done will be done again. There is nothing new under the sun.” And Bob, I know you had something you wanted to say on this.

Bob (00:48):
Well, I’ll tell you what, when you’re thinking about history lessons of the markets, it’s kind of like the weather.

Shawn (00:52):
Okay, what do you mean by that?

Bob (00:54):
It’s beautiful and sunny one day in the markets or the weather’s beautiful and sunny one day, then the next day you have a big storm, and then the next day it’s beautiful and sunny again.

Shawn (01:04):
Sometimes on the same day.

Bob (01:06):
People ask me, nowadays, you could definitely tell I’m the older guy doing this. They go, “What’s the stock markets going to do?” I say, “Well, what’s the weather going to do?” And they go, “Well, yeah, I hadn’t thought about that.” Because stock markets act about like the weather do.

Shawn (01:21):
There’s instruments you can look at, there’s things you can kind of see if you can get an idea of what it might do, but it’ll still surprise you.

Bob (01:29):
And how often is the weatherman correct?

Shawn (01:31):
I think, what is it like 50% of the time?

Bob (01:33):
Yeah, exactly. So how often are economists correct? Back in ’22 when they were raising interest rates seven times they kept saying recession, recession, recession. It never came. But everybody just, and now we’ve had the tariffs and saying the same thing. No one knows until it’s happened. It hasn’t happened until it’s happened.

Shawn (01:52):
The only economist I know that are right a hundred percent of the time are the ones that document the history of the economy.

Bob (01:58):
Yeah, that is true. That’s exactly true.

Shawn (02:00):
Just 2020 hindsight, right?

Bob (02:01):
Investors should always consider financial history during market downturns because that’s where you start to think, oh no, it’s bad weather today. It’s a bad market today, and the markets, the media loves it, Shawn.The media just goes into a frenzy over it.

Shawn (02:20):
It’s all part of normal market cycles.

Bob (02:23):
Exactly.

Shawn (02:23):
We’ll say it one more time for emphasis, but Ecclesiastes 1:9, “What has been will be again, what has been done will be done again, there is nothing new under the sun.”

Bob (02:33):
So I thought today what we would do is we’re going to take a quick look back at the last 50 years. Shawn, I’m 63 now in June, and I can remember all of these things that we’re going to talk about. There’s so many more besides these four or five we’re going to talk about. But everyone…

Shawn (02:56):
We don’t necessarily record our episodes like Joe Rogan for three to four hours. I mean, feel free to let us know in the comments if you’d like us to talk longer, but we don’t usually go that long. So you had to narrow it down a little bit.

Bob (03:09):
This first one, we’re going to go back 50 years and we know what we’re going to do is we’re going to bring it up to some of the latest events, but there’s going to be a common theme that you’re going to see through every single one of these events. Alright? First, we’re going to start with the 1973-1974 oil embargo. And Shawn read what happened then? Okay.

Shawn (03:30):
Well, as you know Bob, I was totally around. Well, I wasn’t even born yet on that one. So the 1973 oil embargo led by Arab members of OPEC was primarily caused by the United States support for Israel during the Yom Kippur war.

Bob (03:47):
I was going to see, that’s why I had you read that. I wanted to see if you said that right.

Shawn (03:50):
I believe I said that right.

Bob (03:52):
Yeah, I think you said it.

Shawn (03:52):
Yeah. The US decision to resupply the Israeli military after the conflict began triggered the embargo as a form of retaliation and political leverage.

Bob (04:01):
Now everyone my age, Shawn, remembers this and the reason we remember this is because we couldn’t get gasoline for our cars.

Shawn (04:10):
Is that when you see the pictures of everybody lined up down the street up to the gas stations? And it was ration of how much you could get.

Bob (04:18):
My dad’s office was right behind the gas station and he knew the gas station owner very well. So the gas station owner would say, you come down at this certain time, I’m going to make sure that y’all get your cars filled with gas. I mean, it was a crazy, crazy time. And because of that, it triggered a major market downturn. Stocks dropped during this time as much as 45%.

Shawn (04:43):
From their previous highs?

Bob (04:44):
Yes.

Shawn (04:44):
Wow.

Bob (04:45):
Yeah, that’s a lot, Shawn.

Shawn (04:46):
Yeah, that’s a big drop.

Bob (04:46):
That’s a whole lot. I mean, it was a very radical time. I was 11 to 12 years old.

Shawn (04:54):
The markets never recovered from there, right? Sarcasm for anyone who didn’t pick that one up. No, they recovered. They completely went on to new highs.

Bob (05:04):
They completely recovered and went on to new highs. Okay.

Shawn (05:08):
Yeah.

Bob (05:09):
So we’re going to fast forward. There was a lot of things that happened during the 70’s, but we’re going to fast forward, what is this, about 12 or 13 years?

Shawn (05:15):
It’s Black Monday.

Bob (05:17):
Black Monday is very well known. I’d been in the business then for three years. I remember this very much so.

Shawn (05:26):
I was almost one. I hadn’t quite hit my first birthday.

Bob (05:29):
So you probably don’t remember it, but I bet your dad does.

Shawn (05:31):
No, I don’t remember it other than from studying it in history.

Bob (05:34):
So by the way, these first two, anybody that’s younger and listening, just go ask your parents. Okay, they’ll tell you. But the markets dropped 20% in one day and that became known as Black Monday. And it wasn’t caused by just a single event when that happened, but it was a combination of factors.

Shawn (05:53):
Okay. Alright. He wants me to read through it from my experience of going through it.

Bob (06:00):
Right, exactly.

Shawn (06:00):
Exactly. Yeah. So the crash was not caused, as Bob said, by a single event, but by a combination of factors including rising global interest rates, a US trade deficit, a declining dollar and inflation concerns.

Bob (06:13):
Does that sound like today?

Shawn (06:15):
I hear a few of those sound like maybe we’ve gone through this before.

Bob (06:20):
Yep, yep, yep.

Shawn (06:23):
Okay. Almost like history repeat itself.

Bob (06:26):
Scripture is saying.

Shawn (06:26):
Like Ecclesiastes said.

Bob (06:27):
The weather get sunny and then it gets stormy and it comes back again.

Shawn (06:31):
And what has happened will happen again.

Bob (06:33):
Okay.

Shawn (06:34):
So Black Monday was a perfect storm of economic pressures, market structural issues and psychological factors that combined to create catastrophic market crash.

Bob (06:43):
Don’t you love that. Psychological factors. And boy, the media back then, we didn’t have the internet.

Shawn (06:49):
So Bob, here’s a question for people who are follow along with this on the markets. How much do the markets typically drop if nobody’s selling?

Bob (06:59):
I think that would be zero.

Shawn (07:01):
Oh, so really it only starts dropping if you have a bunch of people panicking and selling.

Bob (07:06):
That creates panic.

Shawn (07:07):
Yeah. So…

Bob (07:09):
So, what happened after Black Monday, like it did with the oil embargo?

Shawn (07:12):
As you all know, we don’t invest in the stock markets anymore. Sorry. It went on to new highs in the following years after it recovered.

Bob (07:21):
Completely recovered and went on to new highs so far.

Shawn (07:25):
And so far, that’s two separate times that if you didn’t sell in either these situations, would you have more or less money now than you did before?

Bob (07:34):
More.

Shawn (07:34):
Right.

Bob (07:35):
Yeah. Each time it recovered.

Shawn (07:36):
It’s not a real loss until you sell it.

Bob (07:38):
So, so far we’re two out of two, aren’t we?

Shawn (07:40):
Yep.

Bob (07:40):
Yeah. So now we’re going to get up to the early 90’s. We’re going to push forward five or six years. So we had the recession of the early 1990s. Most people don’t even remember this, but I do because I was in the business and we saw this recession peak out in about 1992, and it was caused, again, by a combination of factors. It was a weak economy, loss of consumer and business confidence, psychological, again, due to the oil price shock of 1990, that was triggered by Iraq’s invasion of Kuwait. Now I remember this very well.

Shawn (08:14):
Me too, I just turned four and I was following this along really close. My dad had to keep taking the paper back from me because I wouldn’t let him read it.

Bob (08:23):
Now the markets didn’t drop 45 or 20% this time.

Shawn (08:27):
But still, I mean it was still a significant…18% is not nothing.

Bob (08:32):
Yeah. Dropped 18% from July of 1990 to October of 1990. Okay. But…

Shawn (08:39):
In the following years, the markets recovered and went onto new highs.

Bob (08:42):
New highs. We can nearly say this repeat and repeat and repeat. These are history lessons, right?

Shawn (08:48):
That’s right.

Bob (08:48):
Okay. So fast forward, we come to 2000, 2002.

Shawn (08:52):
Yep. Stock market, internet bubble.

Bob (08:54):
The internet had been invented. Who by?

Shawn (08:56):
It was Al Gore, right?

Bob (08:57):
Yeah. Right.

Shawn (08:58):
He also invented pants, if I remember correctly.

Bob (09:00):
So the internet had been invented and we had all these new companies coming out. I remember America Online and there was a Commodore computer, and then there was Apple was just, I remember the little bitty Apple about this big.

Shawn (09:13):
Yeah, AOL was my first exposure to logging in as well.

Bob (09:17):
Google hadn’t even come along yet. I mean, they were just barely coming along.

Shawn (09:21):
It was like “Ask Jeeves” was one of them, too.

Bob (09:23):
Yeah.

Shawn (09:24):
The old school search engine.

Bob (09:25):
We had, what was it? I remember another one was Lycos was another one. So anyway, we had.

Shawn (09:31):
It was like Netscape two or something like that. Anyway…But then also it was the World Trade Center bombings, 9/11.

Bob (09:37):
During that time. So between 2000, 2002 was a chaotic time.

Shawn (09:41):
A lot going on.

Bob (09:42):
And we had this dotcom bubble crash, which was very big. I mean, the NASDAQ fell over 75% during that time.

Shawn (09:54):
Well, it was a combination of factors. So including overvaluation of technology, stocks, the failure of many dotcom businesses to generate substantial revenue or profits, even profits, and a shift in investor confidence.

Bob (10:07):
People were investing in these businesses that hadn’t made a single dime and they were just pushing them up, up, up.

Shawn (10:11):
Yeah. Yeah. It was crazy. The value of a lot of those companies was just the idea of what they might be worth. And it wasn’t based in any fundamentals, not making revenue or not anywhere close to making a profit. I mean, that’s not sustainable.

Bob (10:25):
So the NASDAQ dropped over 75%, Shawn.

Shawn (10:31):
During that time. Yeah.

Bob (10:31):
So you were about 14 at this point? 14,15?

Shawn (10:35):
Let’s see. Somewhere around there. Yeah.

Bob (10:37):
Yeah. I don’t know if you were paying attention to this or not.

Shawn (10:40):
Oh, of course. Yeah.

Bob (10:40):
Hey, you were just about a couple years away from going to college. You wanted to major in finance. So…

Shawn (10:48):
Well, at the time, I dunno if I had made that decision, but originally I wanted to go into maybe something with being an attorney. So I wasn’t quite to finance yet. So I think I missed being able to eagerly watch this.

Bob (11:00):
I’m glad I saw the light. Otherwise, you’d be on TV saying, “Call me if this happens.” Okay. So it dropped, NASDAQ dropped over 75%. S&P was down, I think over 50%.

Shawn (11:11):
And the Dow dropped 25%.

Bob (11:12):
Remember the Dow’s only 30 companies and they’re the biggest ones. But what happened again?

Shawn (11:18):
Well, once again, in the following years, the markets recovered and went on to new highs.

Bob (11:22):
It recovered all that 75%, every single bit of it. So far, we’ve talked about four out of four, I believe. Is this the fourth one?

Shawn (11:33):
I wasn’t counting. I think it was 4.

Bob (11:34):
I think it’s four out of four so far.\

Shawn (11:35):
So far 100%.

Bob (11:37):
100% it’s recovered.

Shawn (11:38):
So next one.

Bob (11:40):
Now it is. We’re getting up there where everyone remembers this. This is when you started working. Yeah. You were working.

Shawn (11:44):
Yeah, I started working with you in 2008. So it was a great time to join your industry.

Bob (11:50):
I remember you were the green kid on the block. You were just joining us and we’re watching watching the whole market crash.

Shawn (11:57):
Yeah. I’m thinking, is this normal? Is what you deal with on a regular basis? No, every once in a while.

Bob (12:03):
Like Lehman Brothers crash. I mean, it was crazy.

Shawn (12:08):
2007-2009 real estate bubble mortgage crisis. And so 2008 stock market crash. So this is the first one that I legit was following now that I’m working in the industry. Part of the Great Recession was primarily driven by the bursting of the US housing bubble fueled by lax lending practices.

Bob (12:28):
Exactly. Because you remember, you could just get a house, could go get a mortgage

Shawn (12:33):
As long as you’re breathing.

Bob (12:33):
As long as you’re breathing, you could say, well, I think I worked there. And they’d give you a mortgage.

Shawn (12:38):
And then also there was very predatory mortgage practices, people getting into mortgages that they shouldn’t, like the one, the adjustable rate, someone thinking, oh, I can afford this. And then a year later, a couple years later, it just would pop up so much and then they’d have to foreclose on the house. And a lack of regulatory oversight. This, in turn, led to a crisis of confidence in financial institutions. It’s almost like a very consistent. It’s always something that causes a loss of confidence. That’s almost always the reason for these starting.

Bob (13:10):
Do you think we ever learn by our mistakes? What has will be again.

Shawn (13:13):
I mean as a group, as a public, I feel like we don’t, but there are people that I think learn from the lessons, just not a general public, unfortunately.

Bob (13:23):
So you realize those, the people in their twenties, Shawn, I mean you’re going to be 40 here in a year or so…

Shawn (13:30):
I dunno what you’re talking about.

Bob (13:32):
But they don’t remember this necessarily. And the S&P, the Dow, NASDAQ, they all dropped over 50%.

Shawn (13:40):
Yep.

Bob (13:42):
Oh my goodness. Once again…

Shawn (13:44):
In the following years, the market’s recovered to go on to new highs.

Bob (13:48):
We’re learning a lot about history.

Shawn (13:49):
I know it’s repetitive, but hopefully we’re getting the point across.

Bob (13:53):
Every single time. These are such good history lessons.

Shawn (13:57):
I believe the only thing that changes…there’s two things that change each time. Alright. The thing that’s new, the exact percentage of how much it drops, and then the overall combination of causes, whether it’s one major one or multiple things that all kind of lead to people losing confidence and people start selling off.

Bob (14:19):
Look at the last couple of them.

Shawn (14:21):
Okay. In 2020, COVID-19 pandemic.

Bob (14:23):
Everybody remembers this one.

Shawn (14:24):
I mean, as the pandemic began to spread in March of 2020, government officials around the world shut down economic activity, panic triggered by the economic consequences and uncertainty led to a stock market crash that included the three worst point drops in US history to that date.

Bob (14:38):
I remember some of those days. I mean, my goodness, the market was down 10 or 12 one day and up 10 or 12 the next. It was crazy. This is what the crazy one was. And you remember we went in and we bought energy, crude prices even went below a dollar a barrel in the Spring of 2020. How insane is that?That’s just insane. I mean, this is not, you know it’s not going to last.

Shawn (15:06):
No.

Bob (15:07):
And so we’re just like, let’s go in and buy energy. Buy, buy, buy. And we did and we had a very big return.

Shawn (15:14):
What’s so crazy to me in looking back at this one is yes, it dropped really quickly, but also how fast it actually came back to at the levels it was before the drop and then continued to went on to hit new highs, period. New highs, not just highs for the year, but a new high, period, by the end of the year.

Bob (15:36):
No, this one was super fast. I mean the S&P 500 dropped over 30%, down 26%. Bam. It came back. So again, the common theme.

Shawn (15:45):
Just coming back to the levels before the drop was over maybe a few months.

Bob (15:49):
So we don’t need to say in the following years here. It recovered in months. The market went on and recovered to new highs.

Shawn (15:55):
In the following months , it went on to recover.

Bob (15:56):
And then another very recent one, just a couple of years, I noticed these are kind of getting tighter, is that there’s a lot you’ve had to put up with a lot in the last four or five years. You’ve got the COVID-19, then we had 2022, which I call the interest rate crisis, and there was all this fear of recession that never happened.

Shawn (16:18):
The fear of what where we might have a recession.

Bob (16:21):
Just like we’ve had with the tariffs. So the Fed raised interest rates seven times that year. And I mean we were at 0% interest.

Shawn (16:33):
They were trying to fight inflation.

Bob (16:35):
Yeah. They were trying to stop it. So it was soaring inflation they were trying to combat. Exactly. And those interest rate hikes, concern of a global recession. We had the invasion of the Ukraine during that point too, which disrupted some of the global supply chains. And NASDAQ dropped over 32%. Dow dropped over 20%. Even bonds were down that year. But that was because interest rates had never gone up that much in one year. When you go from 1% to 2% and you’ve raised interest rates 100%. But again, just within months and the following years, the markets did what?

Shawn (17:14):
Completely recovered and went on to new highs.

Bob (17:16):
I really see in a pattern here. This year…

Shawn (17:19):
What pattern?

Bob (17:20):
Markets always go on to new highs. They recover and go on to new highs. And so all the day traders are just driving themselves crazy and they just need to stick around.

Shawn (17:31):
This year, as of the recording of this, unless you’re watching this in, I don’t know, 2026 and beyond, but this year the tariffs, so NASDAQ dropped over 20% in just a few months, the S&P 500 went into correction territory. Will the markets once again recover and reach new highs?

Bob (17:47):
You know what, Shawn? By the time we’ve made this, I mean not by the time we made it, we’re making it right now.

Shawn (17:51):
By the time this is published.

Bob (17:52):
By the time this is published, it might’ve already recovered. But even if it hasn’t, it’s a great history lesson to learn because the common theme for all of this is that the markets always recover. Now we always have to make the compliance statement that…

Shawn (18:09):
Sure, past performance is no guarantee of future results. Yeah, okay.

Bob (18:12):
But the question you always have to ask yourself, is it really different this time?

Shawn (18:17):
Yeah. Now obviously what we can’t say is, like I said before, how much is it going to drop over what period of time? And then how long is it? Months? Is it a year, two years? How long before it comes at least back to where it was before the drop. That’s what we don’t know.

Bob (18:35):
Well, one thing we do know is we know that God’s word never changes.

Shawn (18:40):
That’s right.

Bob (18:41):
It’s always the same. And we do know we’re going to end up on this scripture. So, go for it, Shawn.

Shawn (18:47):
All right. Ecclesiastes 3:1-8, “There is a time for everything and a season for every activity under the heavens. A time to be born and a time to die, A time to plant and a time to uproot, a time to kill and a time to heal. A time to tear down and a time to build. A time to weep and a time to laugh, a time to mourn and a time to dance, A time to scatter stones, and a time to gather them. A time to embrace and a time to refrain from embracing, a time to search and a time to give up, a time to keep and a time to throw away. A time to tear and a time to mend. A time to be silent, and a time to speak. A time to love and a time to hate. A time for war and a time for peace.”

Bob (19:30):
No matter what, during the good times, you always have to be understanding that the bad times will come. And during the bad times, you’ve got to be understanding that the good times will come back. They always do. Do you need a Christian based financial advisory firm to guide you through all these crazy landmines and ups and downs? We at Christian Financial Advisors are here to help you do that. We focus on long-term biblical principles and biblically responsible investing. And we can be reached by phone or text during business hours at 830-609-6986. Or you can reach us through our website www.christianfinancialadvisors.com. We’ve helped hundreds of Christian families in their financial stewardship journey for over 30 years.

Shawn (20:13):
That’s right. And we love to be able to help you because we know that, “Plans fail for lack of counsel, but with many advisors, they succeed.” And so don’t fret. Don’t be anxious about what the markets are doing today or tomorrow. Trust in the Lord and plan for the future. It makes me think of Joseph. God gave him the vision. He saved not just Egypt, but the entire surrounding area by planning ahead and knowing that, “Hey, we do right in the good times and plan for when times aren’t as good, we’ll be prepared.”

Bob (20:46):
That’s right.

Shawn (20:47):
So contact us. As always, we’d love to hear your thoughts, comments, suggestions. You can comment, you can text us, you can email us. And as always, God bless.

[DISCLOSURES]

* Investment advisory services offered through Christian Investment Advisors Inc dba Christian Financial Advisors, a registered investment advisor registered with the SEC. Registration as an investment advisor does not imply a certain level of skill or training. Comments from today’s show are for informational purposes only and not to be considered investment advice or recommendations to buy or sell any company that may have been mentioned or discussed. The opinions expressed are solely those of the hosts, Bob Barber and Shawn Peters, and their guests. Bob and Shawn do not provide tax advice and encourage you to seek guidance from a tax professional. While Christian Financial Advisors believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability.