I don't imagine this will be a very popular post here, but I want to put forward the argument that there is no good reason to think that markets will always go up in the long term. Every argument I have heard just seems illogical to me, and as a result the idea of near-guaranteed long-term growth just sounds like fortune-telling or wishful-thinking.
I am invested in a broad market ETF myself so I would like the markets to go up long-term, but I'm doubting that there is any good reason to believe they will. I'm certainly not the most financially savvy person, so it's quite possible I'm missing something.
Here are some common arguments for the proposition and my responses:
- The markets have always gone up long-term in the past.
Broadly speaking, that has been true up to now (or at least, up to 6 months ago), but how is suggesting that that means long-term growth will continue indefinitely into the future any different from saying “past performance is indicative of future returns”? Just because things have gone a certain way in the past, doesn't mean that will continue into the future.
Is it not possible that we are at the end of a long period of growth, with no more to continue?
- Betting on the long-term health of the markets is just betting on the future of society.
What makes people so sure that the future of society is a good bet? Is climate change not a thing, the effects of which are becoming more and more apparent every year?
Beyond that particular issue, how is it possible for economic growth to continue indefinitely into the future when the resources on this planet are finite?
- If there's a huge market crash, money won't be worth anything anyway.
By definition, cash would be worth more relative to the market in that scenario. Maybe cash would still be worth less compared to things that are essential (like food), but nonetheless it would still be better in that case to be holding cash if such a crash were to happen.
I'm not here to piss people off. If I'm wrong, and there's actually a really good reason to believe that the growth we've seen over the last century is going to continue indefinitely, I would love to know what it is.
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