Quarterly Market Commentary: A New Decade

A new decade has dawned and we mean that literally.  Welcome to the roaring 20’s.  Are roars actually a good thing or a bad thing?  Do bulls roar along with bears?  Only time will tell.

RisingTidesFloatBoatsThe markets cooperated in dramatic fashion in the last year of the “twenty-teens”.  All major asset classes including stocks, bonds, and hard assets – such as gold and real estate – saw their prices appreciate in the year that just was.  Rising tides truly do lift all boats, but remember that when the tide recedes, that is when we truly find out who’s been swimming naked. 

Looking through a slightly longer term lens over the last two years – which is still far far far too short of a time horizon for all but the most seasonal of insects that die with the first breeze of winter – investment returns are more consistent with long-term averages. 

Yes, 2019 was a strong year for markets in general, but 2018 was the worst year for stocks since the global financial crisis of 2008. Q1-2020-Graph-Jamie-CommentaryThe only disastrous decision was to respond emotionally to the volatility of late 2018, as unfortunately many investors did.  There were plenty of scary headlines with geo-political uncertainties – such as trade wars.  And the market had its worst December performance since 1931 as stocks bottomed almost 20% below their highs. 

During moments like these, we all need to realize that volatility is the price of admittance to participate in the markets.  While unpleasant emotionally, well-embraced volatility has been additive to investment returns over the long-term.  For retirement plan investors, downside volatility allows your recurring contributions to buy more.  If the markets are down 20%, and you make a bi-weekly contribution, that contribution just bought you 20% more.  Who doesn’t like buying things on sale?  Keep calm and carry-on down the path to retirement that’s appropriate for you – regardless of how Mr. Market is reacting at the moment. 

Instead of the traditional Wall Street back-patting when markets happen to cooperate, lets undertake a far healthier exercise.  Put a negative sign in front of your returns for 2019.  If that potential loss feels like something that you would not be able to stomach, changes should be made now.  Risk-reductions should only be considered (or more appropriately optimized for your unique needs and circumstances) when the market skies are sunny like they are at the moment.  Wading out to reduce risk in the midst of a raging financial storm is a dangerous proposition and has never been a prudent (or profitable) course of action.

We are drawing to the close of a prolific decade for the financial markets. Hot off the heels of the largest global recession in 80 years, investors who stayed the course have been rewarded.  Still, many remain scarred by the financial crisis. Add in the long list of today’s uncertainties, amplified by our 21st century soundbite-driven world, and it’s no surprise that some investors are fearful of what lies ahead. 

As is often the case, the reality lies in the middle. No, investors shouldn’t expect another historic decade, but they shouldn’t expect disaster either. Every worry is not insurmountable, and it is our job as your investment partner to cut through the noise to focus on what really matters. 

The material and opinions provided in this document are meant for general illustration and/or informational purposes only and should not be construed as investment, tax, or legal advice for any individual. Although the information has been gathered from sources believed to be reliable, each reader must decide whether it is valid and applicable to his/her own unique circumstances. To determine which investment(s) may be appropriate for you, consult your financial adviser prior to investing. Any economic forecasts made in this commentary are merely opinion, and any referenced performance data is historical. As a result, neither is a guarantee of future results, as all investments involve risk. All referenced indices are not managed and may not be invested into directly. Investment advice offered through Resources Investment Advisors LLC, an SEC-registered investment adviser.

James Battmer on January 6th, 2020

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.

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