Why Should I Invest in the Stock Market Now?

Why Should I Invest in the Stock Market Now?

Where Is the Market Headed? Recent volatility has some investors contemplating if they should pull out of the market or sit on the sidelines and wait for the best time to invest. If you re not convinced that now is a good time to be invested, consider some of the reasons that kept our fictional investors from investing in years past. S&P 500 INDEX PERFORMANCE OVER THE LAST HALF CENTURY 1 (As of December 31, 2016) $10,000,000 S&P 500 Index Recession $1,000,000 $16,220 1968 The Vietnam War is dragging on, President Johnson s support rating is down and Martin Luther King Jr. was just assassinated. $22,129 1978 There s no way you can convince me to invest in this volatile market. The S&P 500 Index has gone from 106.99 to 93.15, a drop of over 12%, in two months. 4 $,000 $13,151 1974 The S&P 500 Index fell 10% in the first half of this year alone! 1 We re officially in a recession. $10,000 *All statements made at year end by fictional investors. $17,885 1973 A 10% devaluation of the U.S. dollar and a prime rate of 9.75% 2 this is destroying the economy! $20,764 1977 Inflation is up to 6.7%, and in the wake of the Middle East Oil Embargo, gas prices are skyrocketing! 3 $1,000 12/66 6/75 The unmanaged S&P 500 Index represents the general stock market and is used for illustrative purposes only. It does not reflect the performance of any Franklin, Templeton, or Franklin Mutual Series Fund. One cannot invest directly in an index. All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Not FDIC Insured May Lose Value No Bank Guarantee

Using the S&P 500 Index to represent the general stock market, we see that, regardless of what often seems like bad timing, stocks have historically provided investors with growth over time, despite short-term ups and downs. And often the best buying opportunities were when things still seemed quite bleak. $179,912 1992 Invest now? Not when both Macy s and TWA have filed for bankruptcy and Chrysler, Ford and GM are all reporting huge losses. 8 $452,700 1997 Although the Dow soared in the first half of the year, it crashed on October 17, losing over 7% in just one day! 2 $704,552 1999 The Dow increased 27% this year. And the NASDAQ closed above 4,000 for the first time! 2 $68,953 1985 The number of bank failures is out of control 116 this year alone. 6 $132,242 1989 Before 350 savings & loans failed, 7 I thought they were the safest place to put my money. $86,119 1987 Black Monday s 22% drop in the Dow on October 19 is still too fresh in my mind. 2 $276,064 1995 The S&P 500 Index set record highs 77 times this year. 4 I missed the boat. $564,290 2001 The U.S. entered a recession in March, terrorists attacked the World Trade Center and the Pentagon, and markets fell for the second year in a row. 2 $40,190 1982 The unemployment rate is at 10.8%, its highest in years. 5 Now is not a good time to invest. 12/83 6/92 12 Data sources in support of these illustrative statements are as follows: 1. Morningstar, S&P Dow Jones Indices LLC. See www.franklintempletondatasources.com for additional data provider information. 2. California Department of Finance, Chronology of Significant Events, 2008. 3. Inflation: Consumer Price Index (CPI). Gasoline: U.S. Department of Labor, Bureau of Labor Statistics, U.S. City Average Gasoline Prices. 4. 2017 S&P Dow Jones Indices LLC. All rights reserved. See www.franklintempletondatasources.com for additional data provider information.

For more information on the importance of long-term investing and how to deal with market volatility, contact your financial advisor, call us at (800) DIAL BEN/342-5236, or visit franklintempleton.com. $439,579 2002 The Dow sunk to its lowest level in almost four years. Both the NASDAQ and the S&P 500 Index hit their lowest levels since the beginning of 1997. 2 I m going to wait until the market turns around. $627,227 2004 The Dow closed at its highest level in over two years on February 11. 2 $640,455 2009 The U.S. unemployment rate is at a 26-year high. 10 I m going to wait to invest until the economy starts improving. $1,265,921 While past performance cannot guarantee future results, MAYBE NOW ISN T SUCH A BAD TIME TO INVEST. $506,430 2008 Several banks have failed, like in 1985. The American auto industry has reported huge losses, similar to 1992. Global stock markets have plunged. 2 The Dow fell 38% from its all-time high. 9 $736,929 2010 The European debt crisis has me too worried to invest. /00 6/09 12/16 5. U.S. Bureau of Labor Statistics, U.S. unemployment rate for December 1982. 6. Federal Deposit Insurance Corporation, 1985 Annual Report, FDIC Division of Finance, Division of Research & Statistics. 7. New York Times, U.S. Weighing Plan to Take Over 350 Insolvent Savings Institutions, 2/5/89. 8. The World Almanac and Book of Facts 1996, pg. 509. 9. Dow Jones and Company, Inc. As of 12/31/08. 10. U.S. Bureau of Labor Statistics, U.S. unemployment rate for December 2009.

Recessions Often Lead to Opportunities The stock market in general is forward-looking it moves in anticipation of expected events. For example, if the Federal Reserve was expected to raise interest rates, the market typically would have priced this in even before the rate hike actually happened. Likewise, past market recoveries have typically started before a recession was officially over. Thus, if you keep waiting to start investing, you may miss an attractive investment opportunity. The charts below show the S&P 500 Index s movements shortly before, during and right after each of the seven U.S. recessions over the past 50 years through 2016. During this period, recessions lasted an average of 13 months, and stocks hit bottom an average of 4 months before the recession ended. 11 Past performance cannot guarantee future results. S AND RECOVERIES OVER THE LAST HALF CENTURY 11 December 1969 November 1970 90 80 70 10/69 3/70 8/70 1/71 Market peak November 1968 Recession starts December 1969 Market trough May 1970 Recession ends November 1970 Peak to trough -36% Trough to recession end 26% July 1990 March 1991 400 375 350 325 300 5/90 8/90 11/90 2/91 5/91 Market peak June 1990 Recession starts July 1990 Market trough October 1990 Recession ends March 1991 Peak to trough -20% Trough to recession end 27% November 1973 March 1975 110 90 80 70 60 9/73 2/74 7/74 12/74 5/75 Market peak January 1973 Recession starts November 1973 Market trough October 1974 Recession ends March 1975 Peak to trough -48% Trough to recession end 34% March 2001 November 2001 1,400 1,300 Market peak Recession starts March 2000 March 2001 Market trough September 2001 1,200 1, Recession ends Peak to trough November 2001-37% 1,000 Trough to recession end 18% 1/01 4/01 7/01 10/01 1/02 January 1980 July 1980 130 Market peak Recession starts October 1979 January 1980 120 Market trough March 1980 Recession ends July 1980 110 Peak to trough -12% Trough to recession end 24% 11/79 4/80 9/80 December 2007 June 2009 2,000 1,500 1,000 500 10/07 9/08 8/09 Market peak October 2007 Recession starts December 2007 Market trough March 2009 Recession ends June 2009 Peak to trough -57% Trough to recession end 36% July 1981 November 1982 150 140 130 120 110 5/81 10/81 3/82 8/82 1/83 Market peak November 1980 Recession starts July 1981 Market trough August 1982 Recession ends November 1982 Peak to trough -27% Trough to recession end 35% The unmanaged S&P 500 Index represents the general stock market and is used for illustrative purposes only. It does not reflect the performance of any Franklin, Templeton, or Franklin Mutual Series Fund. One cannot invest directly in an index. All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. 11. Calculations are based on the S&P 500 Price Return Index. Standard & Poor s, National Bureau of Economic Research.

Franklin Templeton Distributors, Inc. One Franklin Parkway San Mateo, CA 94403-1906 (800) DIAL BEN / 342-5236 franklintempleton.com Franklin Templeton Investments Your Source for: Mutual Funds Retirement 529 College Savings Plans Separately Managed Accounts Investors should carefully consider a fund s investment goals, risks, charges and expenses before investing. To obtain a summary prospectus and/or prospectus, which contains this and other information, talk to your financial advisor, call us at (800) DIAL BEN/342-5236 or visit franklintempleton.com. Please carefully read the prospectus before you invest or send money. 2017 Franklin Templeton Investments. All rights reserved. IBS SIDFL 02/17