With the recent 10-year anniversary of the stock market’s recovery from the Great Recession and financial crisis, I spent some time looking back at some of the newsletters I’ve written. I looked at a few in the middle of the storm as well as several during the recovery. The current economic expansion is now the second longest in terms of duration, but far behind others relative to the overall strength of economic growth.
In the 2nd quarter of 2008, when things were looking very bleak I said, “Reacting negatively in this market may keep clients from achieving their long-term goals…What happens in the next several weeks or months will write a new history lesson. We all want it to be written as a story of success.” Wow, I like that!
Later in 2009, I quoted Nick Murray who wrote an article called, Wall of Worry. He said, “Markets often go up quite a bit when most people are still firmly convinced that they have no business doing anything of the kind.” 1 I added, “If he is right, this should be a normal bull market. The current economic environment, in my opinion, in anything but normal. Only time will tell.” This has not been a normal bull market and I certainly nailed the fact that the economic environment has been anything but normal.
The headlines today can seem to be as bleak as always. Interest rates are rising, geo-political risks abound across the globe and the political banter in the US never (always) disappoints. Dr. Joseph Coughlin, the Founder and Director of the MIT AgeLab provides some great insight on The Anxiety Effect. He states, “Anxious investors are more apt to devote their attention to information that is negative. When faced with the choice between information that could potentially inspire optimism versus data that paints a dismal future, the anxious client will opt to focus on the latter. To further complicate matters, anxious investors process ambiguous information differently. Data that isn’t crystal clear is more likely to be perceived as bad or even threatening, fueling their pessimism.”2 Although the names and circumstances are different today than they were ten plus years ago, they still provide plenty of fodder to keep investors on edge.
Since the beginning of 2007, throughout this ongoing stream of negative headlines investors have withdrawn over $1.3 trillion from equity mutual funds. Yes, I said trillion! Throughout this time-frame from the market low of 3/9/2009 through 12/31/2017 the S & P 500 return was 371%. 3
I found several other quotes worth sharing because I believe there are still relevant today. “In my opinion, we are at a cross-road for investors. What will be considered normal in a world that is changing a breakneck speed? Being a successful investor over long periods of time requires discipline and an understanding of your own goals, objectives and tolerance of risk. Over the long-term we focus on diversification instead of market timing which we feel could cause excessive risk to our investors. The simple nature of my ideas should in no way minimize our current political and economic circumstances. We have problems, we can fix them, and I personally am not betting against the United States of America to lead the global economic rebound.”
Perhaps we will look back in another ten years and realize the more things change, the more they stay the same!
1 Nick Murray, Client’s Corner: A Wall of Worry, 2009
2 Hartford Funds, Deja News: Crisis of Today…or Yesterday? pg. 7, 2nd Quarter 2018.
3 Hartford Funds, Deja News: Crisis of Today…or Yesterday? pg. 8, 2nd Quarter 2018.
The material in this publication is based on data sources we consider to be reliable, but it is not guaranteed as to accuracy and does not purport to be complete. The interpretation and organization of these ideas are the views of Kevin Welu and do not represent the opinions of TrueNorth Wealth Management. This information is not intended to be used as the primary basis of investment decisions nor because of particular individual client requirements, should it be construed as advice designed to meet the investment needs of one investor.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Private Advisor Group, a registered investment advisor. Private Advisor Group and TrueNorth Wealth Management are separate entities from LPL Financial.
The economic forecasts set forth in the presentation may not develop as predicted. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. No strategy assures success or protects against loss.
The Dow Jones Industrial Average Index is comprised of U.S.-listed stocks of companies that produce other (non-transportation and non-utility) goods and services.
The Dow Jones Global ex-U.S. includes equity securities with readily available prices that trade globally, excluding the U.S. The index is a subset of the Dow Jones Global Total Stock Market Index.
Lipper indexes are based on the 30 largest funds by asset size within the Lipper objective and do not include multiple share classes of similar funds.