We wrapped up September on a high note, and had positive gains for the month as well as quarter. Year-to-date is also solidly higher. Much of the headlines were dominated by Trump, “Rocketman”, and hurricanes…but the markets shrugged off any negative news and were driven from strong corporate earnings. Interest rates (as measured by the 10-year treasury) hit yearly lows in September and are still lower than where they started the year. The Fed took a much-anticipated break from raising short-term rates in Q3 but indicated they would consider another raise by year end as well as normalizing it’s balance sheet. At the end of the day, here’s how the major indexes looked:
|S&P 500 (Large Cap)||4.48%||14.24%|
|Small Cap Index||4.58%||10.59%|
|Barclays US Agg Bond Index||0.85%||3.14%|
|BloomBarc Municipal Bond Index||1.06%||4.66%|
|Dow Jones Commodity Index||4.90%||-0.77%|
|Source: Dow Jones, data as/of 9-30-2017|
With that said, I wanted to share some perspective now that we are approximately 10 years since the volatile rise and fall of the financial markets in 2007-2009. Imagine back then that a “doom and gloom” analyst was on the TV telling people that the banking system was about to crumble, and many financial firms were going to fail and/or be bailed out by the government. Imagine that you were able to foresee the unemployment rate jump to 10% and that our economy was going to hit a recession not seen since the 1930s. You were also able to predict that the future President would socialize the health care system and raise tax rates – including the medicare tax for the rich of +3.8%. You knew the federal debt would continue to grow to massive amounts. You were even smart enough to predict that all these changes would still be in place 10 years later (i.e. today).
If someone gave you one investment to choose and hold for the next 10 years, which of the following would you have chosen?
- S&P 500 (stock fund)
- a 10-year Treasury note
Knowing that my readers are honest, I am fairly sure that most of them would not have chose stocks. In that environment, with that kind of foresight in a hot market, it would have been awfully tough to pick stocks. But as you can guess, I am telling you that on the basis of total return and over the last ten years, S&P500 did the best. The S&P 500 has generated a total return (capital gains plus reinvested dividends) of approximately 7.2% per year, essentially doubling in value in ten years. Here’s how they fared annually (roughly):
- S&P500 (stock fund) +7.2%
- a 10-year Treasury note +4.7%
- Gold +5.7%
- Oil -4.3%
- Housing +1%
- Cash +.4%
My point is simple: if you are investing for the long term, it’s often wise to ignore all the pessimists and negative news and focus on good investments in good companies. And hopefully have an experienced professional advisor guide you to these investments through good times and bad.