Experts suggest the lost decade of investing
has just begun
which means you might not see a positive return
on your money for the next 10 years.
Hi guys, it's Mark.
So during the pandemic
investing gained a lot of popularity, returns went
through the roof and many people became conditioned
to expect extremely high profits.
However, now the bull market has ended
and people are being awakened
to the harsh truth that it's possible to lose money.
A lost decade is when a stock market is flat
or even in declined for a period of more than 10 years.
I mean, it's demoralizing enough checking your investments
every day for a week and seeing them go down consistently.
Now imagine that lasting for a whole 10 years.
That's what could lay ahead.
This isn't some crazy conspiracy theory
it's actually happened before.
I remember investing in the S and P 500
at the height of the dot-com bubble
in the year 2000, and 10 years later,
still not seeing any profits.
Well, of course, I didn't just invest one big chunk
of money at the height of the bubble and completely stop.
I was also investing as the market was falling.
So to put it more accurately, I did see a return
but not on the money that I invested
at the height of the bubble, that took a decade
after seeing this once before
there are definitely signs that this is happening again.
So we're gonna be looking at the data
from multiple different sources to determine
how probable a lost decade of investing actually is.
After we've talked about this potential evidence
one investor to another,
I'll give you my thoughts on all of this.
And most importantly, how you can best prepare for it.
First, we've got to discuss the looming threat
of stagflation, and know,
that's not a rapid increase in stag dues.
It's the growing concern
that the economy will spiral out of control
and potentially, drag down your investments with it.
If you were to ask an economist, what stagflation is,
they would say it's the combination
of stagnation and inflation.
Oh, and sometimes high unemployment.
Now, if I'm honest, when experts talk about this
they make it sound far more complex than it needs to be.
So let's break down the explanation in plain English
because it's important that we are aware of this threat
as it could contribute to a lost decade of investing.
So the first part, stagnation is defined
as a period of little to no growth in an economy.
We are talking less than 2% a year.
I like to think of this
like one of those little lemonade stores,
the ones those little entrepreneur kids run.
Let's say in the first year, the kid makes a hundred dollars
but the next year they only make $101.
Although there was a small increase in the profit,
the business is still stagnated as it doesn't seem
to be growing at any significant rate.
When this happens to the economy, the natural result
is people lose their jobs
as companies forced to reduce costs by making cuts
to their workforce.
The second part, inflation is simply a decrease
in purchasing power.
Meaning you can buy less with your money.
I mean, one of my favorite snacks
is a little chocolate bar called a Freddo Frog.
This used to cost around 10 cents when I was in my twenties.
Whereas now they're about 30 cents a piece.
Inflation stole my other two Freddos.
So stagflation is the worst of both worlds
as the economy isn't growing and inflation
is running a mock.
Before the 1970s, this was thought to be in impossible.
This is because of so called the Phillips Curve
which was a well respected concept in the 20th century.
This states that inflation and unemployment
have an inverse relationship.
So that's a complicated way of saying that stagflation
should never occur because high unemployment
and high inflation were seen as complete opposites.
Just think about it.
If people have lost jobs,
they probably have less money to spend.
As you can imagine, this is bad enough,
but with high inflation, every dollar people have,
it's losing value by the day.
So during stagflation, they have less money,
that's also worth less.
It's like kicking someone when they're already down.
- [Son] That's more of a punch dad.
- Well, this is a nightmare situation
for policy makers and central banks.
As they don't have all the tools they need to fix it.
I imagine them being in a room
with many different levers that they can do lots of things
with like changing interest rates and creating more money.
However, they only have a certain amount
of levers at their disposal.
It's not like they can just pull a lever
and produce more computer chips.
This is because they don't have control
over supply of our goods and services.
This is important as when suppliers being suppressed
by other factors like tensions
between countries and COVID 19, they're just left
twiddling their thumbs.
If inflation is Loki pretty formidable, but manageable,
then stagflation is Thanos, an unstoppable force
no one wants to encounter, at least of all us investors
because it means a lost decade is far more likely.
So as we're already seeing high inflation,
the question is what could possibly
cause our economy to grind to a halt
and stagnate at the same time?
That brings us on to absurd valuations,
which is something that could very possibly
cause a stagnant economy.
The last few years have been crazy.
As the fed has been pumping 120 billion of cash per month
into the economy, through its quantitative easing program.
It also placed to keep interest rates close to zero
allowing money to move freely
to those people and businesses that needed it the most.
They were stuck in a pretty impossible situation
with a choice between artificially supporting the economy
or making people suffer a pandemic
and a financial crisis all at the same time
through no fault of their own.
This led to 80% of all US dollars
in existence being printed during the pandemic.
That's a gigantic increase in the money supply.
And it all shocks me to this day.
People were getting a lot of easy money
and this couple with increased excitement
around stocks and crypto gave birth to momentum investing.
I'm talking about the huge hype around investing
in stocks like Game Stop and AMC
and getting rich in a matter of a few weeks
by driving the stock prices to the moon.
By its very nature, this means
that the stock prices didn't reflect the true value
of the companies anymore.
As you can imagine,
all this excitement created even more hype for investing.
In fact, one in 10 Gen Z said GameStop inspired them
to start investing.
The other nine people obviously hadn't realized
that you can get your investing journey
kick started with a free stock slice
from public.com worth between three and a thousand dollars
if you're in the USA, I'll leave that link below
if you'd like to pick that up.
Just remember, when investing, your capital is at risk.
Investing in apps like this have made it easier
for the everyday person to get involved
in the stock market and also interact
with a community of other notable investors.
Due to this newfound accessibility,
this has probably contributed to stock market holdings
now making up about half of the $109.2 trillion
of financial assets that households own.
This is a good thing
as investing for the long term is crucial.
However, many new investors may have been conditioned
by the pandemic to expect extremely high returns.
Now that the fed has stopped pumping so much money
into the economy and interest rates are rising,
we're starting to see the consequences.
It's kind of like everyone was having an awesome party
on the beach, but as the tides starts to retreat
we see who's actually swimming naked.
So it begs the question,
by artificially accelerating the stock market,
did we just bring forward the next years of gains?
It's a bit like if you put a kid in a room
with a huge chocolate cake and tell them not to eat it
and in return, they get reward.
In this case, we may have just demolish the cake
meaning there's no reward waiting for us
as we've already eaten it.
The economy is controlled by supply and demand.
So it makes sense that if people have less access
to easy money, then demand will decrease.
And company earnings will suffer,
driving down the stock prices.
But on the other hand, there is also extreme pressure
on the supply of our goods and services.
So as we're already seeing high inflation,
the question is what could possibly cause
our economy to grind to a halt and stagnate
at the same time?
We need to address the rise in geopolitical risks
that they're already having a huge impact
on things like commodity prices.
I mean, oil is currently skyrocketing in price.
The world is so interconnected now due to globalization,
this means that when something like the Russian-Ukraine
conflict happens miles away,
it has a real knock on effect on the economy.
The war has already caused Russian
and Ukraine factories to stop production,
energy prices to go through the roof.
And even cargo planes to be outright canceled over the area.
Economic sanctions have made it harder
for traditional currencies to move freely
which has caused people to turn
to crypto for its utility and decentralization.
But the issue with purchasing crypto
is the fees are often very high
unless you're using the FTX app where the fees are 85% lower
than the top competitors.
The best part is when you sign up
using the code MarkTilbury
you get free crypto on every trade over $10.
Conflict puts global supply chains
at even greater risk than the pandemic.
And we'll have a much larger effect
than not being able to grab some toilet paper
when you need it.
That's because the production of goods like platinum,
aluminum and steel are getting impacted
which are essential parts
in much larger supply chains like cars and computer chips.
It's like the star of a huge domino chain.
I mean, Russian people can't even grab a big Mac anymore.
As McDonald's have made the executive decision
to close all their stores in the area.
We're in for a turbulent ride
as tensions between countries are at an all time high,
and I'm not just talking about Russia and Ukraine.
The Chinese leader, Xi Jinping is getting older.
And one of his main objectives
has always been to reunite China with Taiwan.
It's actually written into their law
that if Taiwan tries to assert its independence from China
then if all the possibilities
for a peaceful reunification are exhausted
then China is legally required to invade Taiwan.
The only thing standing
in their way is the power of the US military.
However, over the last couple of decades
China has grown significantly in strength,
almost everything we use
includes parts manufactured in China.
Just imagine if all these supply chains
were disrupted by a conflict.
So supply and demand are in chaos.
Company earnings are getting battered,
which is in turn causing investors to panic
about a lost decade of stock market returns.
I'm calling this panic, the mass investor exodus,
people are losing hope in the stock market.
And all points are struggling, which is leading
to many people selling out of the markets completely.
Investors generally split their money
between stocks and bonds.
However, if we experience stagflation
due to all the factors we've discussed,
then bonds actual returns will be negative
because of the high inflation rate.
And as for stocks,
the slow economic growth means lower earnings
and therefore, they will probably suffer as well.
So, how do we prepare for something like a lost decade?
Well, I'm gonna be completely honest.
You'll hear so many conflicting thoughts around this.
During my research, I found that some experts
were recommending a more active stock picking strategy
as just buying and holding might not lead to high returns.
After looking a closer at the source, I found
that they actually managed an investment advice firm.
So therefore, didn't make any money
from index fund investors.
They just wanted people to trade
for their own personal gain.
It is very possible
that we're in for a lost decade of investing.
However, like I said, I've been through this before
and I've come out the other side.
A lost decade is only really a lost decade
if you make one big investment and then stop.
Last time, I just kept investing consistently every month
which then meant I was buying at lower and lower prices.
This gave me the opportunity to make a lot more money
when the market inevitably recovered
and all that's not even accounting
for the dividends building up over time.
In my opinion,
the worst possible thing you could do
is invest in the bull market and then completely stop
or pull your money out of the markets
when things get a little bit demoralizing.
So although this sounds
like a pretty scary time for investors,
if you apply these proven long term strategies
then it is possible to come out ahead
and make a solid return during a lost decade.
So I'm gonna leave the next video right up there
but don't click on it just yet.
Make sure to subscribe if you wanna grow your wealth, okay?
I'll see you over there.