“Finance is not merely about making money. It’s about achieving our deep goals and protecting the fruits of our labor. It’s about stewardship and, therefore, about achieving the good society.” – Robert J. Shiller
Hi there. Mike Brady with Generosity Wealth Management; a comprehensive full service financial services firm headquartered right here in Boulder Colorado and here today is actually up in Wyoming. This is 4th July. I wanted to record my video. I’m up here at my cabin. Hopefully you’re doing something wonderful for Independence Day. If you were wondering if I’m in front of a green screen and that’s a picture behind me, the answer is no. That is actually the picture out of the front of my cabin. That’s what I get to look at all day long up here in Dubois Wyoming and frankly I’m working all week because I’ve got a lot of stuff I’ve got to get done. But I want to give you the year to date video and the rest of the year preview and going into next year election year.
So, this has been an incredible year so far. Pretty much every month in the unmanaged stock market indexes has been positive except for the month of May. If you remember last year 2018 was negative and people have a tendency to get real negative, they extrapolate negative news into it’s going to be negative forever or I told you that it was going to be horrible, particularly if you have a negative bias. Going back all the way until the 1920s three out of four years are actually positive so there is a strong probability of the markets going up, but sometimes it does go down. And so, what we have to do is kind of check our first biases; are we a negatively biased person or positively.
I’m going to do a video next month actually talking about election years and what are the probabilities of the year before an election, the year of an election, et cetera, and how politics may or may not affect the stock market. Because the economy and the stock market are also two different things, which I’ll do it in a video going forward.
But let’s talk about 2019. It came roaring back the first quarter of this year, wiped away in general in the unmanaged stock market indexes in one quarter what we had lost last year in 2018. We were looking good in April of this past quarter and then May we gave some up. We never went negative in the unmanaged stock market indexes and all of the losses in May were wiped away in June and then some. So now, with the unmanaged stock market indexes we are at all time high so people might say to themselves yeah but aren’t you really worried that the market is at a high? And the answer is if you believe the market is going to go up then it’s always at highs, I mean that’s the point is that you should hope that there’s going to be new highs. Just because it hits a high doesn’t mean that it’s a ceiling and it can’t go any further, as a matter of fact if you truly believe that why do you have investments at all? That means that where you are today it’s not going to be higher in the future, which makes no sense. Why would you have investments if you don’t believe that it’s going to be higher in the future?
So far this year we are in double digit positive returns for those unmanaged stock market indexes. May was a single digit declines with the S&P 500, which is one of those indexes I talk about, about seven percent decline in the month of May, which we made back up in June. It is normal for there to be double digit declines. Most years have double digit declines and we haven’t even seen that. In 2018 last year we did, we had some real sharp declines. But that was only one out of the last four or five years where we had those double digit declines, so we have had an unusually unvolatile timeframe in the last two/three/four years. So, let’s remember that because if you’re investing for the long-term why make any decisions based on short-term trends?
I’m going to put a couple of charts up there. The first one I want to put up is the earnings per share for the S&P 500 continue to look really nice. Bonds are up as well for this year, single digits but between five and ten percent depending on what area of the bond market that you are invested in. So, stocks are up, bonds are up, unemployment is down, earnings per share is up. I mean if you are a negative person you can try to find something to be negative about, but I would argue that doesn’t serve you any good.
There’s an argument that some people say is like hey better too early than too late in most things. Because it’s looking so good I should move out because I’ll avoid negative things in the future. My answer would be no that doesn’t help you because I have seen in my 28 years of doing this since 1991 that getting out might be one thing, but if it continues to go up you never get back in, or if it goes down you have such a propensity to preserve that it’s also when do you get back in? And so, no, if you’re in this for the long-term, five, 10, 20 years then stay invested, have your plan and stick with it. If you’re going to have investments for a short-term, you know, one month, six months, 18 months why should you have any money in the markets? I mean that’s not even a full market cycle. So, if you judge long-term investments based on short-term trends that’s a recipe for disaster.
The economy, as I mentioned earlier, is not the stock market even though the economy is doing great. Now, you wouldn’t know that necessarily by watching the news. If you are getting whipsawed in your emotions by the 24/7 news cycle I would say don’t do that because if you like that, hey great, that’s wonderful, but don’t make any decisions on it and don’t listen to what they have to say about the economy and the stock market because that is going to cause you lots of angst. For the rest of the year continue to be bullish. You’ve heard me for the last my gosh five/ten years be bullish and that has served us well. I see no reason not to be bullish going forward. As a matter of fact, once again, you’ve got to watch my video next month, but 90 percent, going back to the early 30s of the year before an election, 90 percent of them have been positive and strongly positive. And so, that doesn’t mean that we should be invested because of that, but all the ingredients are there.
That’s it for right now. The rest of the year I never answered that thought I never completed that thought. I don’t know what’s going to happen. I don’t know any more than you do. Unlike all those pendants on TV to who say with very little humility that they know what the future is. You don’t know the future and I don’t know the future, but fortunately we’re not investing for the next six months. If you are you shouldn’t have investments. We’re invested for the long-term and I’m going to make the bet that going forward, even if the next six months are down, even if the next two years are down, history has shown that going back to 1950 there’s never been in a diversified portfolio a five year time horizon when you have lost money and so therefore that is a bet that I am willing to take. Even though it’s possible, absolutely, the future is uncertain. However, we can’t live our lives running away from things, we have to live our lives and our investments and the future based on the best data that we have and how we feel we’re going to be best served long-term, not short-term but long-term and so that’s what I think going forward.
Stay tune for that video next month. I have a couple good ones coming forward and I really hope that you watch those and that you have a wonderful – that you had because by the time you get this 4 the July weekend will be over, but anyway hopefully you’re doing well. Mike Brady; Generosity Wealth Management; 303-747-6455. Have a wonderful day. Thanks. Bye bye.