Quarterly Market Commentary: Ben vs. the Waves

Continuing to trade on the name of one our Nation’s greatest founding Fathers, lets focus our attention briefly on Benjamin Franklin: the inventor of bifocals, the lightning rod, and street lamps, among an impressive array of other creations.

Franklin was the most famous person of his era for his advancements for mankind – or, sometimes, his regressions of mankind. In addition, it must be noted that Franklin’s initiatives were not always successful.  In fact, the experiment Franklin worked on throughout his life - the one he believed would be his greatest contribution to mankind - was a complete and unequivocal failure.

 “Wave-stilling,” as he called it, was exactly what it sounds like. On his many voyages between Europe and North America Franklin would diligently work on an experiment to calm the wild seas in order to reduce the peril and volatility of maritime travel.  Of course, this exercise was a futile one and, if Benjamin Franklin could not calm those rough waters, then no one can.

Resources-Social There is no “wave-stilling” here, as the market waves have continued to go up and down over the past year.  Through the first nine months of 2019, the S&P 500 has experienced its best three-quarter start to any year since 1997.  That is great.  However, keep in mind that it comes on the heels of the worst year for stocks since the Global Financial Crisis of 2008, and the worst December for the S&P 500 since 1931.  Bonds have also ridden this wave higher as interest rates have dropped dramatically through the course of 2019.  This has generated strong total returns for the conservative component of a well-diversified portfolio after completely flat returns in 2018. 

There are many things to celebrate in this economy, and very few of them
have to do with the performance of stocks and bonds. 

The average American household is in a better position now than they have ever been in our great nation’s history.  This is not some distortion of data and time periods, as is too often the case with stories brought to us by today’s financial talking-heads.  

Both overall household wealth and annual income recently passed previous peaks.  You must go back 20 years to 1999 to find the last all-time highs for American’s standard of living.  The longest bull market in history and a recovery in home prices have both helped navigate us in to these calmer seas of prosperity.

Benjamin Franklin spent a lifetime trying to calm the seas and failed, and just like the seven seas, markets go up and markets go down.  Over the long-term, stocks go up in value, while bonds and other non-correlated assets provide downside protection with more limited upside.  At any given moment, that statement can be thrown out of whack due to short-term storms that are too noisy and unpredictable to pinpoint.  

Avoiding any singular risk through diversification and building an all-weather portfolio appropriate, regardless of current market climactic conditions, will continue to be the hallmark of our portfolio construction.  A proper allocation strategy that is based upon your particular objectives and time horizons while avoiding emotional reactions based upon fear or greed will continue to be the appropriate investment approach, just as it was 300 years ago when Franklin penned: “Being ignorant is not so much a shame, as being unwilling to learn.” 

James Battmer on October 2nd, 2019

Posted by James Battmer

James Battmer currently serves as Chief Investment Officer for Resources Investment Advisors. In his role, James is responsible for providing executive oversight of the firm’s investment strategy and execution, in addition to overseeing all institutional and high-net-worth client accounts. James has 20 years of experience in the industry, his experience lies in macroeconomic policy, fixed income management and equity selection. Prior to joining Resources Investment Advisors, James previously worked at UMB Bank and Morgan Stanley.

All posts