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My Best Investment Advice Today? Be an Optimist

Thanks to Covid-19, there’s a lot of pessimism out there. My best investment advice? Be an optimist. Over 100 years of stock market history shows why.

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America Runs on Optimism

There are Dunkin Donuts (now officially just Dunkin) outlets in 36 countries including far off places like Peru, Oman and Thailand.

But there is one place where Dunkin reigns supreme and that is in Boston where you can seemingly find an outlet every few blocks. They love their coffee, donuts, Red Sox and the famous slogan – “America Runs on Dunkin”.

But there is a better slogan that really hits the nail on the head – “America Runs on Optimism”.


It is a curious thing that despite all the progress we’ve made in America and around the world in the last century, many investors face the future in a sour mood of pessimism.

This is somewhat understandable given the upheaval we are going through with Covid-19 and the turbulence caused by the speed of change in technology and finance. But to gain perspective, we need to sit back and take the long view from time to time.

This is why books like Enlightenment Now by Steven Pinker and The Rational Optimist by Matt Ridley are so important for all of us to read. They both do a masterful job of looking back at all the progress the world has made and why it is likely to accelerate in the future.

It’s important to keep in mind how far we have come. Life expectancy in England in 1800 was only 40 years and one out of every three infants died. In 1800 American spent 76% of their income on food clothing and shelter; now it’s 37%.

Even looking at America, where much talk is about the persistence of poverty, 99% of us have electricity, running water and refrigerators, 95% have television, 71% own a car and 70% have air-conditioning.

Meanwhile, Cornelius Vanderbilt, one of the wealthiest tycoons of the robber baron period, had none of these things. And “Commodore” Vanderbilt lived in an America that produced some of the most amazing spurts of productivity and efficiency in industry and manufacturing.

For example, between 1870 and 1900, freight charges fell 90%, the price of steel fell 75%, the price of oil fell 80%, and American per-capita GDP grew 66%.

And even during the Great Depression, much scientific progress was made. For DuPont, 40% of the their sales in 1937 came from products that did not even exist in 1929.

For the world, the progress, while uneven, has been absolutely stunning.

During the last 50 years life expectancy has increased by 26 years. Over the past 30 years, approximately 1.5 billion people have escaped poverty. The proportion of Vietnamese living on two dollars a day has dropped 90% in the last two decades. According to the United Nations, poverty has been reduced in the last 50 years more than in the previous 500 years.

Even when it comes to the environment, there have been many improvements that are often overlooked. A car now emits less pollution at full speed then a parked running car did in 1970. And now we have Tesla (TSLA).

My Best Investment Advice: Be a Rational and Optimistic Investor

What does all this of this have to do with investing?

The trajectory of the American and world economy is upward and very likely to continue to surprise the pessimists and the bears. And that’s due to the natural inclination for growth spurred by a rising population and constant innovation.

The same upward trend can be seen in a chart of the Dow Jones Industrial Average from 1900 until today.

Sure, you will see some sharp downdrafts and some choppy periods but the overall trend is upward, especially since World War II. The lesson here is to try to stay invested in markets for the long haul, but I suggest you take one action that will boost your returns.

Keep a decent cash level in order to stay flexible and take advantage of down markets.

Buying some quality stocks at bargain prices will allow you the opportunity to beat the benchmarks and let you sleep a bit better at night.

Look forward and invest with optimism tempered by acceptance that markets fluctuate. If you don’t stay in an optimistic frame of mind, you will surely miss out on some great investment opportunities.


Carl Delfeld is a member of the Cabot investment team, and chief analyst of Cabot Explorer.