Triumph of the Optimists

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This week’s post is sponsored by YCharts.

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Every generation faces its share of crises. Market crashes, wars, recessions, inflation, political upheaval — the negative headlines never stop. And yet, through it all, the long arc of the stock market bends upward. Episode 55 of Signal or Noise is a reminder of that powerful truth: optimism, backed by data and discipline, triumphs (an ode to the 2002 book by Elroy Dimson, Paul Marsh, and Mike Staunton).

I. The Historical Triumph

Markets are volatile and can be punishing in the short run, but over time, they’ve been remarkably rewarding. U.S. equities, despite all the chaos of the past century — world wars, oil shocks, tech bubbles, pandemics — have delivered strong nominal and real returns.

Investors who stayed the course were rewarded not for perfect timing, but for patience.

While U.S. equity returns have certainly been among the highest of any country, the outperformance of stocks versus bonds and cash has been a worldwide phenomenon. A globally diversified equity investor would have generated a real return (after inflation) of over 5% per year since 1900, increasing their purchasing power by a staggering amount.

II. Crisis is the Constant

If you’re waiting for the “perfect” time to invest — a time when the world is calm and headlines are quiet — you’ll be waiting forever. There is always a crisis. Always a reason to worry. But history shows those who invest in the face of fear often outperform those who wait for clarity that never comes.

The best long-term returns follow the most difficult times, which is why every investor should learn to embrace panic when it comes.

III. Volatility is the Price of Admission

Market drops aren’t bugs — they are features. Temporary declines are the entry fee for long-term gains. If you want the reward, you must endure the ride.

The primary reason why stocks have a higher long-term return than bonds or cash is that they have much higher risk. There’s no free lunch.

IV. The Cost of Pessimism

Being perpetually bearish may sound smart, but it’s often a costly stance.

Sitting in cash, timing the market, or waiting for a crash can mean missing out on the compounding magic of markets.

V. Innovation & Human Progress

The greatest tailwind to investing? Human ingenuity.

From medical breakthroughs to AI, from electrification to the internet, progress continues despite setbacks along the way.

Markets ultimately reflect that progress. We live longer, healthier and more prosperous lives today than ever before — and that shows up in rising corporate profits, productivity, and asset values.

VI. 2025: A Microcosm of the Triumph

So far, 2025 has given us a little bit of everything:

• Crisis

Tariffs, markets in turmoil, fears of recession…

• The Price of Admission

The S&P 500 suffered its 4th bear market of the past 7 years, with a 21% decline on an intra-day basis and 19% decline on a closing basis…

• The Cost of Pessimism

Stocks are outperforming bonds and cash…

• Technological breakthroughs

Nvidia became the world’s first $4 trillion company, powering the AI revolution…

• Triumph of the Optimists

The S&P 500 is back at an all-time high, up over 30% from the April lows. A triumph of the optimists once more…

Every week I do a video breaking down the most important charts and themes in markets and investing. Subscribe to our YouTube channel HERE for our latest data-driven insights.

Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. Read our full disclosures here.

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