December 2018: Market Performance Updates
“The big picture doesn’t just come from distance; it also comes from time.” – Simon Sinek
When we look at the news, when we look at the markets we might get all worked up. We might have the same perception that everything is going down the tube, particularly when it might happen to us, but I’m here to remind you to stay calm and remember the big picture.
Hi There. Mike Brady with Generosity Wealth Management; a comprehensive full service financial services firm headquarters right here in Boulder Colorado. So I want to talk a little bit about non-market stuff first, but it is relevant and I think you’ll find it interesting. With all the news about handgun violence in Chicago or mass shootings, if you were to ask most people are we in a more violent America today than we were 25 or 30 years ago? I’m going to make a statement that most people would say yes. But the reality is that’s just not true.
I’m going to put a chart up there and you’re going to see that one of the biggest successes that we’ve had over the last 20 or 30 years is our decrease in violent crime. And, of course, we want it down to zero don’t get me wrong, but that is one of the trends that has been kind of missed when you’re watching news on a daily basis. What about property crime? Are you more susceptible to property crime? Actually no. I’m going to put a chart up there on the screen and you’re going to see that same kind of a trend, we actually are living in a less violent America than we were 25 years ago than we are today, even though you might not feel it. Property crime is the same type of thing, you’re actually safer and your valuables, et cetera, than you were 25 or 30 years ago, even though you might not feel it. And I would say when it happens to you it certainly becomes personal and it certainly doesn’t feel like when I throw a chart up there you’re like wait a second, but I was impacted dramatically by it on a personal basis.
The reason why I bring this up is when we look at the news, when we look at the markets we might get all worked up, we might have the same perception that everything is going down the tube, particularly when it might happen to us, we’re like oh my gosh I used to have X amount and now I have a little bit less from whatever point that you particularly pick. And many times I would say that you pick a point that’s pretty short. You have long-term goals yet you pick a point, a high point, that’s short-term, which in my mind makes no sense.
Remember 2017? It was just a year ago. Market went up pretty much, the unmanaged stock market indexes went up almost every week and pretty much every single month and if you were invested in that most people saw a portfolio that went up that way as well. If you look back at my videos 10/11 months ago I would say that’s real unique. That’s the exception, not the norm. So you might say wow the market has gone down spectacularly in the last couple of weeks. It’s been very volatile this year. My answer would be yes it has. Yes that’s true and if you need the money next month that might be a problem. Of course right now as I’m recording this on a Monday morning we’re right back, at least from a Dow, the unmanaged stock market index, is back to where it was maybe 12 months ago. Definitely up for where it was two years ago, definitely up from where it was five and ten years ago. The future could be different. I think that’s what people are always worried about they’re like wait a second is this a new trend? It’s different this time. I don’t know how many times in the last 27 years I’ve heard that it’s different this time and every reason for why it’s different seems to be different. That’s the only thing that changes, and then it’s not.
So what I would say is when the market goes up, an unmanaged stock market index just for illustrative purposes, 100 points over four days or over two weeks let’s say and then gives up 300 or 400 in one day, only one of them gets the news. So far this year we are negative 2018 and I don’t know where the year is going to end. That’s actually kind of the big mystery for this year, what’s going to happen between today and the end of the year? But the end of the year is just one point, I mean that’s the one interesting point is that if decisions are made based on an arbitrary date on a long-term vision that you have for yourself that makes absolutely no sense to me.
Three out of four years historically have been positive, which means one out of four have been a negative. And being a few percent negative causes someone to change a long-term strategy, you’re going to be worse off for it. That would be my opinion going forward. You don’t know the future and I don’t know the future. The only thing that really changes when the market goes real volatile or goes down is that everybody seems to know on the news exactly what’s going to happen. All of a sudden the confidence level that everything is horrible and crappy just went up by two or maybe three. And of course, the people coming out saying I knew it all along comes out as well, which of course is ridiculous. I’m sorry that’s the reason why I personally don’t watch CNBC or some of the other news programs because when have you ever turned on the news, the local news and said everything is okay, everything is great. Wow, things are going just fine. That just doesn’t work that way. In order to be successful you have to understand that long-term the market has gone up, long-term diversified portfolios have gone up even though the future could be different. If you’re not willing to take some risk in a down year, in this year if it’s going to be down a few percent that’s part of the game. We’ve talked about this if you go back every year I’ve been doing videos for ten years now, almost 200 of them, it’s always the three steps forward two steps back and if you focus on the two steps back then you’re never going to have the three steps forward. That’s just the way investing works.
Am I rattled by all this? No. Should a strategy change the market – I’m going to move this over just a little bit because the sun is hitting my eyes. When the market first hit 24,000 and it went up to 26 and now it’s back down to 24,000 the unmanaged stock market index, did you change your strategy? No. Did you change it when it first hit 24? No. What I have seen over the last couple of years, my goodness why am I saying that, over the last 27 years, when the market hit 20,000 people were like well it’s obviously at a top. And then it went up to 22 and people were like well it’s obviously pretty toppy, pretty much at a high, that’s obvious. That was a year and a half ago. Then it went up to 23, 24, 25, 26, 26 and a half and now it’s back at 24, now it’s in the 23 for the unmanaged stock market indexes.
If you bought at 26, great, that’s not so great. But the reason why you bought it is you assume, and history has shown, that in the long-term it’s higher, the long-term being three, four, five, six years. However, if you bought it at 20, 15, 16, you know what, that’s why you have long-term. And long-term where was it? It was just a few years ago; we’re not talking decades ago. So you’ve got to keep the big picture in mind, particularly when you’re looking. I’m going to throw up on the chart there what it looks like. That’s what its looked like over a one, a two, a five and a ten-year time horizon. If you only focus on the short-term like a mosaic real close to your face, you’re never going to see the big picture. It does become personal. It does become personal when it’s your portfolio, that’s why you have to perhaps be even more cool and listen to maybe someone like me who is saying don’t listen to the guy on the news because he’s going to try to get you excitable. Is it exciting to go to the barbecue and have everyone say yeah everything’s great? No. People are either fearful or they’re greedy. When the market is going up all they want to do is talk about their winners. When it’s going down it’s oh my God everything is horrible. Who can I blame for this horribleness? Don’t fall into that trap. That’s all I have to say.
I’m always here if you need to talk with me. 303–747–6455; Mike Brady; Generosity Wealth Management. Bye bye.