Wealth consists not in having great possessions, but in having few wants.
~ Epictetus, Greek Philosopher c. 55- 135 AD
Question: How long might this economic expansion continue?
Answer: Having just closed the books on the strongest year for US stocks and bonds since 2002 and 2013, respectively we’re enjoying some cautious optimism. This expansion has lasted longer than most everyone anticipated and may have the potential to continue at a sustainable level if we pay attention, pace ourselves and avoid a major misstep in policies by the Federal Reserve.
How to win? Don’t Quit
According to Strava, a social media network for athletes, the second Friday of January is National Quitter’s Day. This is when we’re most likely to abandon New Year’s Resolutions. During these first two weeks of the year, the virtuous and optimistic goals are first replaced with complacency and then are totally abandoned. It’s a good sign that we’ve made it past National Quitter’s day without reckless disregard for society or noticeable negative financial market interference. Similar to personal goals, financial and economic goals are having the potential to become self-fulfilling prophecies when driven by thoughts and actions. It is truly possible to think and talk our way into a recession; so far that hasn’t happened.
The journey through 2020 and beyond will host its share of geopolitical, economic, earnings, election cycle and politically influenced risks. These are each potential vulnerable spots for investors. Self-awareness on the local and global scene may help determine how consumers, investors and markets react to various circumstances which will likely influence outcomes. Much of the “fear” that is discussed is actually false evidence appearing real. Focusing on what we do know may prove to be more productive and fruitful.
We do know that for the first time in U.S. history since 1850, there was not a recession in the past decade 2010-2020. All other decades did experience a technical recession. Low–interest rates and low inflation helped to keep the lid on overheated economic growth while China and the U.S. have agreed to a limited trade agreement, we’re not dependent on a “synchronized global recovery.” Economic growth led to job growth according to the Bureau of Economic Analysis Q3 2019 report.
Goals Without Plans are Wishes
This economic expansion could possess limitless potential staying power. Results built on factual content rather than emotion and random evaluations of economic data matters. Real-time assessment of leading economic indicators and participating companies are similar to player selection when building a cohesive, healthy and effective sports teams.
Having the opportunity to participate in the lives of children and young adults engaged in sports has a number of rewards. One young lady in our world is a phenomenal volleyball player. The life lessons portrayed both off, and on the field, whether in volleyball, hockey, basketball, baseball or football are the foundation of sound decision making.
Depth on the bench combined with facts, knowledge and objectivity are qualities that may reduce the occurrence and severity of emotionally driven decisions on the court or on the trading floor. History suggests that those often ill-fated demonstrative decisions lead to potential subpar performance. For example, according to Raymond James Research, errors related to market timing may be detrimental to a portfolio in the long run. In fact, an equity investor who missed only the top ten best days over the past 15 years would have underperformed financial equity markets by ~470 basis points on an annualized basis. Ouch!
Life lesson here is to have a strategy and a plan in place. Stick to the rules.
A Set Back is A Set–Up for A Comeback
Market pullbacks may provide opportunities like those we saw in 2018 with only two such drops greater than 5%. For comparison sake, the historical average is four such episodes each year. Despite US/Iranian tensions and impeachment proceedings, we remain calm at the moment.
Keep Score and Track Progress
Corporate earnings are a tool used to keep score, just as are points scored in sports. Tracking trends, magnitude and sector participation may shed light financial market facts while identifying any potential bias in areas like technology.
The question remains, how long can this expansion persist? The answer is, at a slow and steady rate, this could certainly continue. Stay focused and invest accordingly.
All expressions of opinion reflect the judgment of Raymond James & Associates, Inc., and are subject to change. Information has been obtained from sources considered reliable, but we do not guarantee that the material presented is accurate or that it provides a complete description of the securities, markets or developments mentioned. There is no assurance any of the trends mentioned will continue or that any of the forecasts mentioned will occur. Economic and market conditions are subject to change. Investing involves risk including the possible loss of capital. International investing involves additional risks such as currency fluctuations, differing financial accounting standards, and possible political and economic instability. These risks are greater in emerging markets. Companies engaged in business related to a specific sector are subject to fierce competition and their products and services may be subject to rapid obsolescence. Past performance may not be indicative of future results.
All investments are subject to risk. The opinions expressed are those of the writer as of January 23, 2020, but not necessarily those of Raymond James and Associates, and are subject to change at any time based on market conditions and other factors. The S&P 500 is an unmanaged index of 500 widely held stocks. It is not possible to invest directly in an index. Past performance may not be indicative of future results. The data and information contained herein was obtained from sources considered to be reliable, but accuracy and completeness are not guaranteed. “Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.” This article provided by Darcie Guerin, CFP®, Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. She may be reached at (239)389-1041, email firstname.lastname@example.org Website: www.raymondjames.com/Darcie.