Week 24 Day 7: Trust the Process: 100 Years of Evidence Says Stay the Course

Every generation thinks their crisis is the one that ends the stock market. The Great Depression destroyed 83% of stock values -- they recovered. WWII threatened civilization itself -- stocks recovered. The 2008 financial crisis nearly collapsed the banking system -- stocks recovered. COVID crashed the market 34% in 22 days -- stocks recovered in 5 months. The market always recovers because it represents human ingenuity, adaptation, and the drive to create value.

Post-crisis recovery times from peak-to-trough-to-new-high: Great Depression (1929-1932): -83%, recovered by 1945 (16 years including WWII and deflation). 1973-1974 bear market: -48%, recovered by 1980 (6 years). Black Monday (1987): -34% in one day, recovered in 2 years. Dot-com crash (2000-2002): -49%, recovered by 2007 (7 years). Financial crisis (2007-2009): -51%, recovered by 2013 (4 years). COVID crash (2020): -34%, recovered in 5 months. 2022 bear market: -25%, recovered by 2024 (about 2 years). The average recovery time from a bear market (20%+ decline): approximately 3.5 years. If you can hold for 4+ years without selling, every historical drawdown has been temporary. The only investors who suffered permanent losses were those who sold during the decline. Nick Murray's law: 'Temporary declines are always temporary. Permanent losses are always made by panicking investors.' The process: invest regularly, diversify broadly, keep costs low, and never sell in a downturn. This process has worked for 100 years, and the Lindy Effect says it will work for 100 more.

The recoverability of equity markets is driven by the fundamental nature of stocks as claims on corporate earnings, which are claims on economic output. Global GDP has grown at approximately 3% real for over a century, driven by population growth, technological progress, and capital accumulation. As long as the economy produces more output over time, corporate earnings grow, and stock prices follow. Siegel (2014) documented that equities have delivered positive real returns over every rolling 20-year period since 1802 -- a 222-year track record that spans the collapse of empires, world wars, pandemics, and every financial crisis in modern history. The mean reversion of valuations (Campbell and Shiller, 1998) ensures that even when stocks become expensive (high CAPE ratio), subsequent returns are lower but still positive over 10-15 year horizons. The only scenario where stocks permanently lose value is the permanent destruction of the economic system (a la Soviet Russia or Zimbabwe). For investors in diversified democracies with functioning capital markets, this risk is low enough to justify long-term equity exposure as the core wealth-building strategy. The Lindy-reinforced conclusion: buy-and-hold diversified equity investing is the most battle-tested wealth-creation strategy in human history, and its expected future life (based on its 200+ year survival) exceeds any competing alternative.