Insights from Economic History for Reassurance Today

As a financial advisor, I know that election season always raises concerns from my clients. Regardless of the candidates or party affiliations, it’s a tense time. The prospect of a power shift can be unsettling and add to the pressures of U.S. history’s most challenging inflationary periods. The anxiety around investments and retirement planning only grows. In these moments, I encourage my clients to look to the past, comparing today’s challenges with similar economic cycles, to embrace reassurance and hope.

Recently, I came across an excellent example.

Occasionally, I spend my spare time delving into my family’s past. And while pre-internet’s limitations often keep me from digging too deep, I occasionally unearth small treasures that pique my interest—none more relevant or intriguing than the one I stumbled upon a few months ago.

 

St. Louis Post-Dispatch, January 1981

 

This quote from my grandfather, Macon E. Toberman (1890-1981), was published in the St. Louis Post-Dispatch in January 1981 following the 1980 presidential election and reflected his keen economic insights, expertise, and optimism during financial uncertainty. Macon was 90 at the time of writing and passed away later that same year.

 

Macon Toberman, Belleville News-Democrat, early 1981: Still working at Age 91.

 

Why is this relevant?

Because we can look to past economic events and historical thought leaders for reassurance in building a solid portfolio today.

Who was Macon E. Toberman?

During his career, my paternal grandfather, Macon Toberman, was president of Toberman Grain Company and had previously served as mayor of National City, Illinois, home to the St. Louis National Stockyards – one of the most extensive livestock processing facilities in the world throughout the early part of the 20th century. He helped oversee one of the nation’s largest distribution hubs and major livestock processing centers during his tenure. At its peak, the stockyards spanned 650 acres, employed over 10,000 people, and processed tens of thousands of cattle, hogs, sheep, and calves daily.

 

St. Louis National Stock Yards, Early 20th Century

 

As a key hub for Midwest agribusiness and a driving force in American exports, the St. Louis National Stockyards aligned with Macon’s deep understanding of economic value and global trade. His expertise, grounded in a firm grasp of economic history, helped create jobs and support the community.

 

1971 Ford Autocar A64B: Toberman Grain Company

 

1980 Election: A Beacon of Hope

To understand this excerpt, we must delve into the background of this time. The 1980 election emerged as a symbol of hope for many as the nation searched for a leader to steer it toward economic recovery after the 1970s—a decade notorious for the worst inflationary period in U.S. history. As the election neared, it was evident that the next president would be instrumental in the nation’s recovery – regardless of whether Ronald Reagan or incumbent Jimmy Carter won.

In the excerpt above, my grandfather highlighted several crucial points regarding the economic landscape following the 1980 election. Despite concerns about the cautious decline in record-high inflation, he considered whether:

1. 1. Cutting interest rates would enable businesses to increase their profits.
   2. Increased profits would allow companies to create more jobs.
   3. More jobs would lead to lower unemployment rates and a healthier economy.

Insights Learned From the 1980 Election 

Sound familiar? Today, we find ourselves in a similar situation—grappling with the aftermath of several years of near-record-high inflation as we find ourselves in a similarly pivotal and heated election season between Donald Trump and Kamala Harris. 

Over forty years later, with inflation having surged recently – but now beginning to show signs of meaningful retreat similar to the environment in 1980 – the Federal Reserve, in September 2024, took its first step in five years to ease economic pressures by cutting its target federal funds rate range by 0.50% to 4.75-5%. This action reminds us that despite the decades of change, one constant remains: we are still vulnerable to the same competing drivers of inflation and unemployment – and the Federal Reserve’s reactions to these ever-changing data points often look similar to the policy actions of past generations. 

As seen in previous economic cycles, the market is a complex dynamic system that is always changing and evolving. In the end, we are living in an environment made up of human beings whose economic structures and natural tendencies can create similar patterns over time. 

 

“History doesn’t repeat itself, but it often rhymes.”

– Mark Twain

 

The most important consideration for you as a retirement investor is whether – through the zigs and zags of all these recurring economic cycles – the stock market can still be relied upon to produce the capital growth and income needed to sustain your multi-decade retirement plan into the future.

The key takeaway is that stock market growth over the long term is a function of corporate earnings growth and innovation. When investing in the stock market, we are investing in the future of human ingenuity and our societal ability to expand our standard of living and technological capacity over time.

As it relates to my grandfather – who was born in 1891 and passed in 1980, I reflect on this quote:

 

“Consider that children who grew up traveling by horse and cart and burning wood for heat in the late nineteenth century spent their final days traveling by airplane and living in houses warmed by the splitting of the atom.”

– Mustafa Suleyman, The Coming Wave: Technology, Power, and the Twenty-first Century’s Greatest Dilemma (2023)

 

It’s important to understand where we are in any given cycle or economic state and remember that a rising tide raises all boats. In our case, this rising tide refers to continued human technological innovation.

As we can see, the U.S. stock market, as measured by the S&P 500 index, has continued its advance forward through many Presidents of both political parties since World War II:

The S&P 500’s performance through each presidential term highlights the impact of different administrations on market trends.

As presidential elections come and go, and economic concerns like inflation and unemployment rates ebb and flow, history gives us reason to trust that future leaders and their administrations will work to implement policies aimed at maintaining long-term economic stability.

When it comes to your retirement—even if you disagree with the winner of an election—we believe staying invested for the long term with the portion of your retirement portfolio you have allocated for growth is the best strategy for ensuring your wealth will continue to hold its value through many possible recurring inflationary or recessionary pressures in the future.

How Can Understanding Past Economic Events Help Us Make Better Investment Decisions Today?

The past five years have been unsettling for many Americans, much like the highly inflationary era of the 1970s. Rising costs of essentials like healthcare, auto insurance, and groceries have put a strain on many families.

As Sir John Templeton once observed, “The most dangerous words in finance are ‘this time is different.’” By talking to our relatives and examining past economic cycles, we gain insights into the causes of today’s challenges and use that knowledge to anticipate potential economic trends—helping us to better plan for retirement and manage our investment nest egg.

How Can a Financial Advisor Help?

In uncertain times like election season, I follow my grandfather’s example by relying on patience, persistence, and a long-term outlook. While short-term market fluctuations can disrupt portfolios, staying the course is key.

A well-structured fixed-income portfolio, guided by a trusted financial advisor, can provide stability through economic volatility and support a lasting retirement. Using a bond ladder strategy to maximize returns and reduce the effects of downturns has stood the test of time and will continue to help investors navigate future challenges.

Toberman Becker Wealth is a fee-only, independent fiduciary firm based out of St. Louis. Whether starting to dream about retirement in your 50s or actively planning for retirement in your 60s, we help people nearing a transition build a resilient retirement plan. We operate in the best interests of our clients, always, and our top priority is to help you live comfortably now, without sacrificing your financial future later.

If you’re looking for an investment advisor to help you build a diversified retirement plan that ensures comfort and peace of mind, feel free to book a meeting or give us a call.

Disclosure: Any mention of a particular security and related performance data is not a recommendation to buy or sell. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Nothing on this website should be considered as personalized financial advice or a solicitation to buy or sell any securities.