Your Memory of what the market has done before can deceive you in dangerous ways.” Amid the ongoing turmoil over tariffs and daily market jolts, “the most significant question for investors is this: What’s in your memory bank?”
Peter Bernstein, the late financial historian and strategist, said investors carry “memory banks: the market returns collectively earned by people of similar age.” The problem? “Your memory bank can deceive you in dangerous ways.” Past experience “is a reasonable guide to the future only if the future turns out to resemble the portion of the past that you’ve lived through. And it often doesn’t.”
Growth Isn’t Always King
“For most of the past decade-and-a-half, value stocks—companies with lower share prices relative to their earnings and assets—have limped along, far behind higher-priced growth stocks like Apple, Nvidia and Tesla.” But so far this year, Warren Buffett’s Berkshire Hathaway, “the standard-bearer for bargain-hunting in the stock market, has gained 17.3%,” while “the technology-laden Nasdaq Composite Index is down 10.9%.”
“No matter how much the chaos over trade policy upsets the global economy, the underpinnings of value will still matter,” says Rob Arnott, chairman of investment firm Research Affiliates. “History shows that during times of turbulence, value beats growth,” Arnott adds.
“And for most of the past century, cheaper stocks outperformed more glamorous growth stocks—not the other way around, as your memory bank might suggest.” If most of your stock portfolio is in growth, “consider adding some value stocks.”
Think Beyond U.S. Borders
“For most of the past two decades, international markets ate U.S. dust as the dollar strengthened and American technology companies boomed.” But “that was then, this is now.” In 2025, “the MSCI ACWI ex USA Index, which tracks markets outside the U.S., is beating the S&P 500 by more than 14 percentage points.”
“Younger investors” might not realize that “international markets excelled for much of the past half century.” From 1971 through 1990, “the MSCI EAFE index of developed international markets outperformed the S&P 500 by an average of 4.2 percentage points annually,” according to T. Rowe Price.
Even today, “international stocks are relatively cheap, trading at less than 16 times earnings over the past 12 months and under two times book value,” while “U.S. stocks are at roughly 24 times earnings and more than four times book value.”
“If the dollar continues to weaken, that will strengthen overseas stocks; even if it doesn’t, the U.S. isn’t the only game in town. There’s a whole planet out there.”
Buying the Dip Isn’t a Sure Thing
The famous book Stocks for the Long Run by Jeremy Siegel argued that “there’s rarely been a period of at least 20 years when stocks didn’t beat bonds after inflation.” But recent research by Edward McQuarrie paints a different picture. After years of research, McQuarrie “found numerous 20-year periods in which bonds beat stocks after inflation, most recently over the two decades ended in 2012.”
“None of this means you shouldn’t buy stocks or hold them for the long term.” It simply “means stocks aren’t guaranteed or foreordained to beat bonds, even over long periods.”
Right now, “stocks are far from cheap.” Investors should “temper your expectations and focus on saving more, in case stocks don’t earn more.”
Cash Isn’t Trash Anymore
“Many investors can’t forget the period from 2009 through 2021, when cash often earned less than nothing after inflation.” But in 2025, “cash is playing offense.”
“With yields exceeding 4%, Treasury bills and money-market funds are clobbering stocks so far this year.” Even better, “they’re also outpacing the official measure of inflation.”
Gold Might Lose Its Shine
“If you’ve recently invested in gold, you know it shines during times of crisis.” But your memory bank might not include “gold’s historically dull performance after rapid peaks in its price.”
“Gold didn’t surpass its January 1980 record closing price of $834 until nearly 28 years later and didn’t rise above its August 2011 closing high of $1,892 for almost nine years after that.” Even now, “at its recent price of about $3,300, it has yet to exceed its 1980 closing high after adjusting for inflation,” according to Dow Jones Market Data.
“Gold is gleaming now, but it could tarnish when calm returns.”
Don’t Be a Prisoner of Your Past Experiences
“As you examine your beliefs, be sure to consult the longest-term data available, to capture periods you didn’t experience personally.”
“Testing the validity of what’s in your memory bank won’t prevent you from being guided by your investment experience. It might help prevent you from being its prisoner.
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