Improving Investor Behavior: The bell-bottom billionaires

Travel back to 1979 with me. Picture yourself waiting in line at a gas station, feeling the pinch of three times the cost of fuel compared to just a few months prior. The oil embargo and runaway inflation are taking a toll on your paycheck. The dream of buying a home seems out of reach due to high interest rates set by the Federal Reserve. Nixon is no longer in office, the gold standard has been abandoned, and BusinessWeek has released an article titled “The Death of Equities.”

It wasn’t the happiest of times.

While standing in line, you strike up a conversation with a seemingly wise individual from the car next to you. Out of the blue, he drops a nugget of wisdom: “You know, someday only two companies will be worth as much as the entire U.S. economy right now.”

You may have thought he was a bit crazy, but fast forward to today, and here we are.

Back in 1979, the inflation-adjusted GDP of the U.S. was $6.97 trillion. Today, just the combined market capitalization of Microsoft and Apple is around $6.94 trillion. Add Nvidia to the mix, and it’s $8.28 trillion. This means that the value of two top companies today is equivalent to 84% of the entire U.S. economic output in 1979.

The 1970s were a tumultuous time with Nixon’s decisions, inflation, falling real incomes, and various geopolitical challenges. However, amidst the chaos, key innovations were taking shape. Intel introduced the microprocessor in 1971, Microsoft was founded in 1975, Apple in 1976, and Nvidia in 1993. Today, the revenue from these tech giants represents a significant portion of the U.S. economy.

The stock market saw significant growth despite the challenges of the 1970s. The S&P 500 has increased 58-fold since 1979, with an annual growth rate of 11.8%. This means that a $10,000 investment back then would be worth about $1.6 million today.

Investing and innovation require patience and a long-term perspective. While headlines may grab attention, true progress happens quietly in the background. The key is to focus on owning a piece of innovation for the future.

The future holds endless possibilities, and it’s essential to remain optimistic about the ingenuity of humanity. Despite setbacks, progress will always lead to a brighter future. So, don’t let fear deter you from investing in the innovations of tomorrow.

Steve Booren, the founder of Prosperion Financial Advisors, emphasizes the importance of looking ahead and believing in the potential of future innovations. Trust in progress and embrace the opportunities that lie ahead.