Lessons Learned from Remarkably Strong 2019 Stock Performance
I don’t usually opine on past or future stock market performance. We can’t change one or predict the other, which makes both largely irrelevant to investing toward your long-term goals.
But today, I’ll make an exception, because I noticed something interesting about 2019: In my 35 years in financial services, I don’t think I’ve ever seen a bigger gap between the volume of gloomy financial forecasts, versus remarkably strong market performance – especially for U.S. large company stocks. It wasn’t just a gap; it was a chasm.
Throughout 2019, investors were bombarded with dire predictions of an allegedly imminent recession. The reasons were plenty: a U.S.-China trade war; Brexit; an inverted yield curve (which is supposed to be VERY bad for stocks); fears of corporate earning slumps, employee layoffs, and slow growth overseas.
But apparently, the S&P 500 Index didn’t get the news. Despite a few mid-year dips, it ultimately rose by 28.5%, from 2,507 to 3,221 as of December 20, as I write this post. Add in dividends, and we’re talking one of the best years ever for U.S. large company stock performance.
Unfortunately, many investors probably missed out, by bailing out in response to the forecasts. I believe the last time I received as many queries from investors wondering whether they should “do something” was back in 2008. I know that clients who asked me stayed the course, but I do worry about others.
Maybe 2020 will offer smoother sailing; maybe not. Either way, if you are a long-term investor, don’t react to predictions or sentiments. Instead, have a plan and stick to it regardless of what the markets do in the short-term. About the only promise I can make is that the markets WILL tank now and then. That’s reality. So too is the near certainty that they’ll eventually recover, and give those who have remained faithful the returns they need to reach their goals.
By the way, do set aside enough assets for near-term spending needs – such as funds to pay for a child’s college costs. That way, if the market happens to tank at the wrong time, you’ll already have the cash you need, so you can leave the rest of it be.
John A. Frisch, CPA/PFS, CFP®, AIF®, PPC™ founded Alliant Wealth Advisors in 1995 and has over 30 years of experience as a financial professional. In his free time, he’s an avid long-distance runner, a sport that requires discipline, patience and vision. John applies these same skills to his professional pursuits: He helps families and retirement plan sponsors adopt a patient, disciplined approach to overcoming financial challenges and reaching their distant goals along a clear path. Learn more at www.alliantwealth.com.