In November 1974, few people thought it was a good time to invest. The Dow was low and people were feeling it. Jim Fullerton, former chairman of the Capital Group, however, offered some perspective by reflecting upon the past. The article Investing Against the Tide is his account of the 1942 market turnaround.
Each economic, market and financial crisis is different from previous ones. Today there are thoughtful, experienced, respected economists, bankers, investors and businessmen who can give you well-reasoned, logical, documented arguments why this bear market is different; why this is not a good time to invest in common stocks, even though they may appear low.
In April 1942, inflation was rampant. A Federal Reserve bulletin stated: “General price increases have become a grave threat to the efficient production of war materials and to the stability of the national economy.” On April 8, 1942, the lead article in the Journal was: “Home construction. Today almost every financial journal or investment letter carries a list of reasons why investors are standing on the sidelines. On the same day, discussing the slow price erosion of many groups of stocks, a leading stock market commentator said: “The market remains in the dark as to just what it has to discount. What turned the market around in April of 1942?