Dow Performance and U.S. History: Why Risk Control Matters

May 21, 2019 Share This 

History of the Dow and Risk Control

When you look back at life in America over the past 100 years or so, it’s amazing to see the progress made in society. Just a century ago, women were a year away from voting equality,1 there were only 48 stars on the U.S. flag,2 and the average number of hours worked per week was 45.6 with weekly average earnings of $25.61.3

Whatever level your clients are involved in the market, they’re likely familiar with iconic historical periods centered on the time’s Dow Jones Industrial Average performance. In 1929, financial panic ensued because of the stock market crash, which led into the Great Depression. More recently, the market’s downward spiral and Global Financial Crisis of 2007-08 still haunt some wary investors.

The recovery times of the most major market downturns have varied anywhere from 6 to 25 years.4 Though its upward climb has certainly not been a smooth one, the stock market has, over time, continued to rise and is currently experiencing near record highs.

Still, many investors remain highly risk averse. Are their concerns warranted? While speculation over the market’s future is just that — speculation — there are lessons from our nation’s history that give insight into factors that typically impact market performance. 

Political and Global Unrest

In general, markets remain more stable when governments can demonstrate stability and avoid conflicts. With the current administration’s international relations in constant flux, many Americans are proceeding cautiously and taking a wait-and-see approach to investing. Last December’s swift and staggering decline experienced by the Dow Jones, S&P 500, and Nasdaq indexes was followed by a slight year-end recovery, yet stocks finished 2018 with their worst annual performance since the Global Financial Crisis.5

Other global uncertainties can also create anxieties, including Britain’s exit from the EU, China’s weakened currency, trade deals, terror attacks and continued conflict in the Middle East. A look at history shows that events such as wars, presidential upheaval, low or stagnant wage growth, and overvalued stocks preceded many downturns. Some investors deem the current conditions reminiscent of those times, undermining their confidence.

An Abundance of Data

Arguably, one of the greatest advances in the past 100 years has been the internet and access to information. With it has come the ability for the average investor to access vast amounts of data, leaving many overwhelmed. In years past, advisors may have informed clients about portfolio performance on a quarterly basis, whereas today’s technology allows those same clients to monitor activity in real time. While access to data has provided many benefits, created transparency, and empowered many investors, there are some who react irrationally to the market’s daily swings, causing fear and panic.

Global Debt

America’s debt is the largest in the world for a single country and is greater than what American’s produce in a whole year.6 As the debt grows, debt holders could become concerned they won’t be repaid and may want larger interest payments in exchange for the increased risk. Despite setting a debt ceiling, Congress typically increases it to avoid another government shutdown. Over the long term, however, a growing federal debt could result in higher interest rates and a slower economy.

Portfolio Mixes

So, what has history shown us? That putting all your eggs in one basket is a risky venture. While the Dow’s future is unknown, advisors can look at historical scenarios to evaluate which investment portfolios provided better downside protection. The S&P performed three hypothetical back-tested portfolios gauging the performance of variable annuities with risk control to that of traditional 60/40 stock and bond portfolios over a 20-year period. Their findings determined that risk control portfolios performed better than stock-only portfolios when examining returns, maximum drawdowns, annual volatility, and other factors. So, it may be prudent for advisors to recommend an annuity option in a portfolio mix. 

When political and global uncertainty looms, your clients can still feel confident that their investments will remain secure, and that they can receive guaranteed income throughout retirement based on the proven performance of annuities over time.

Get more insight on retirement planning by reading our guide, The Value of Risk Control Accounts in Retirement Planning. Click below to access yours now.

The Value of Risk Control Accounts in Retirement Planning


1 History, 19th Amendment, undated

2, The 48 Star Flag, undated

3 JSTOR, Wages and Hours of Labor in 1919, undated

4 Virtue of Selfish Investing, The Dow Jones Industrial Average: 1896-2016, 2017

5 Whittier Trust, Growth Scare … Or a Recession?, 2019

6 The Balance, The US Debt and How It Got So Big, March 2019


Topics: Risk Control