I recently read an interesting book entitled “Fooled by Randomness” written by Nassim Nicholas Taleb. It basically postulates that randomness or luck plays a bigger part in investing – not to mention in life– than most people realize. It is something that I’ve personally experienced over the years.
I came across this chart and it just confirms everything that I already knew. But it is very illustrative, particularly for my newer clients and readers. If you look at the chart below you can see almost every year there's a decline in the market. Occasionally, there are major declines. But guess what? The market (S-P 500) has had positive year-end total returns 24 out of the last 29 years.
My long time readers and clients know that I am a big believer in contrarian indicators. In essence, it is not following the herd. As Warren Buffett states “Be fearful when others are greedy and greedy when others are fearful”. If you look at the chart below, only a little more than half of US adults are invested in the stocks even after a long bull market.
I thought I’d take a moment to think about where the stock market has been and where it may go. We’ve come a long way since those dark days of 2008 and 2009, when it looked like the whole financial system was going to break apart. It seems to me that this has to be one of the most underappreciated bull markets in history. I like that.
I am often asked by recent retirees, “Now that I am retired do I need to have a portion of my portfolio invested towards growth?” My answer is a resounding YES!
Take a look at the Life Expectancy chart below.
I’m always looking for indicators to tell where earnings are headed. As you know that’s what I believe drives stock markets in the long run. The ISM Purchasing Managing Index is one of the many tools I look at to see where earnings may be headed. The chart below shows a recent uptick in this index which may bode well for markets going forward.
I’ve been listening to a lot of Wall Street “experts” saying that we’re stuck in a 2% growth rate due to demographics. The premise is the aging Baby Boomer generation is not consuming as much as they get older thus hurting growth of the economy because it is approximately 70% consumption. Sounds reasonable, doesn’t it?
New clients often ask me when the best time of the year to invest is. As you know, I think it’s not prudent to be focused on the short-term returns. That being said, I came across this chart which confirms what I’ve experienced through the years regarding market trends. Historically, the fourth quarter, followed by the first quarter, has seen the strongest markets.
I came across this fascinating chart and thought I would share it with you. Using the rule of 72, a simple calculation of how long it takes an investment to double, at today’s interest rates, it would take an amazing 46 years to double your investment in a treasury bond. How’s that for a retirement plan!