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Famed investor Sir John Templeton always recommended investing at the point of maximum pessimism. This principle emphasizes that the optimal time to invest and find opportunities is at the bottom of the market and during a crisis, when people are most pessimistic or a stock seems to be undervalued.
People might say that the American Dream is at the point of maximum pessimism. Economists who relate the American Dream to “social mobility” claim that, because fewer people are out-earning their parents now as compared to the 1940s, that decline in mobility shows a decline in the dream itself.
Indeed, journalists like David Leonhardt, musicians like Green Day, and others who say that the American Dream is better found outside of the United States try to convince us that the American Dream is at that point of maximum pessimism.
What are the fundamentals of the American Dream that provide a positive outlook for its future? (iStock)
Our latest survey on the American Dream, annually conducted for five years running, shows more pessimism in 2024 than in previous years, with 32% of people saying the American Dream is out of reach for them – up from 24% in 2023. To paraphrase American Dreamer extraordinaire Taylor Swift, the bad blood over the American Dream is hard to shake off.
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But why should you buy at the point of maximum pessimism? What are the fundamentals of the American Dream that provide a positive outlook for its future?
There are actually many reasons for optimism. The United States is still a world leader in innovation, receiving the most net foreign direct investment. America is the undisputed leader in terms of AI implementation, innovation and investment. And the U.S. economy has continued to grow more strongly in comparison to other advanced nations (even if it can still grow faster).
Eight of the top 10 companies in the world in terms of market capitalization are based in the United States, as are 32 of the top 50 companies. There are more American colleges and universities in the top 50 worldwide than in any other country, and all of these factors can lead to more pathways for people to chase their American Dream.
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Despite today’s perceived political polarization, Americans actually agree on more things than they disagree. And the U.S. continues to attract the most immigrants from around the world, who then refuel the spirit of the American Dream.
Today’s negative vibe surrounding the American Dream brings us to what could be thought of as the point of maximum pessimism. According to Sir John, this is the perfect moment to buy more stock.
Buying more stock in this context may mean chasing your own dreams even more determinedly, setting a vision for yourself, sharing more stories about the American Dream with your family and friends, or talking about a more positive and hopeful view of the American Dream and the future of the country.
At the end of the day, what surveys show is that two in three Americans are still optimistic, thinking they have either achieved the American Dream or are on their way to achieving it.
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During an election year, buying the American Dream at this point of maximum pessimism could also mean that we need to push for our political candidates to talk about the American Dream more positively – or even talk about it at all. After all, Democrats, Republicans and independents feel optimistic about their chances of achieving the American Dream.
Buying the American Dream now requires a long-term mindset, as Sir John intended. Just like investing at the point of maximum pessimism in the stock market requires psychological fortitude and resilience to withstand down times and other obstacles, the American Dream also requires the mental toughness to have a growth mindset and a hopeful view of the future that will lead us to act and improve our own lives.
The American Dream is about individuals – regardless of what happens with daily politics – believing that they have an opportunity to embark on a worthwhile adventure and pursue their own hero’s journey, discovering a vision and meaning for their lives.
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American Dreamer Warren Buffett said it best: “Never bet against America.” In this case, never bet against the potential of 340 million American Dreams – one for each American.
Both in terms of investment and sheer willpower, America and the American Dream always represent powerful sources of hope. Let’s stay positive, and put Buffet’s call into action.
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