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Should We Be Investing Now?

We are living in uncertain times. Politicians with a strong populist-bend have won major elections or are gaining popularity in many countries in the world; attacks by terrorists in major cities have been taking place; and, global economic growth is slowing.

Against such a backdrop, it’s only natural if investors are asking: Should we be investing now? This is where history can help provide some answers.

Let’s take a look at the experience of a real country, the identity of which I will be revealing later. Have a look at the table below, which plots the country’s unemployment rate for a select number of years between 1973 and 1997.

unemployment rate

The years were chosen for a good reason – the country’s unemployment rate started climbing in 1973 (peaking in 1982) and took a good 24 years before it returned to a rate of 4.9% in 1997.

Along the way, the country experienced one crisis after another. Here’s a sample:

  • Entered a severe recession in July 1981 which only ended in November 1982.
  • Stock market crashed by more than 20% in a single day in the late 1980s.
  • Entered a war in the Middle East in 1990; lurched into another recession in the same year which lasted eight months.
  • Entire financial system almost collapsed like a domino in 1998 after a big investment firm in the country went bankrupt, threatening the survival of many of the country’s most powerful banks.

But the thing is, from 1982 to today, the country’s stock market has climbed by 1,826% in price; from 1973 to today, the country’s stocks have gained 1,880%. The country is the USA and its experience highlights a very important fact about investing: Stocks can climb even in the face of huge uncertainty and adversity.

We find the same thing happening in Singapore. The past decade saw our country’s economy enter a recession in 2008, during the throes of the Great Financial Crisis. Our stock market fell by nearly two-thirds from top-tick to bottom-tick during the crisis.

But, there were still companies that managed to grow their businesses strongly over the past 10 years, the end results of which are rising stock prices. Two good examples are Jardine Cycle & Carriage Ltd (SGX: C07) and Raffles Medical Group Ltd (SGX: BSL).

Jardine Cycle & Carriage and Raffles Medical share price changes
Source: S&P Global Market Intelligence

So, should we be investing now? I’d answer, why not? If you can find growing businesses at reasonable valuations, it’s likely you’d be amply rewarded over time, even in the face of uncertainty and adversity.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Raffles Medical Group. Motley Fool Singapore writer Chong Ser Jing owns shares in Raffles Medical Group.