DuPont Wealth - February 2020


When I looked back at the last 10 years, one thing that struck me was how interconnected the world has become. So many of the storylines that drove the markets originated far beyond our shores. We truly live in a global economy. We invest in other countries, buy products in other countries, loan money to other countries (or apply for loans, as the case may be), and trade with other countries. We might be separated by the world’s biggest ponds, but the ripples near one shore are always felt near the other. That means two things. One, for an advisor like me, it means there’s more than ever to keep track of. But two, it means we should react less and less to the headlines of the day — or to each individual ripple. A butterfly might flap its wings in Beijing and cause a hurricane in Topeka, as the saying goes, but there are butterflies flapping their wings everywhere. That’s one reason why we saw many storms but fewer hurricanes in the 2010s. Another thing we learned: Sometimes, most times, slow and steady really does win the race. We were all taught the truth of this as children when we learned the story of the tortoise and the hare. The past decade proved it. Everyone loves growth that comes fast and hot. But when something burns fast and hot, it tends to burn out faster too. One reason we never saw the recession so many people feared is because the economy recovered as slowly as it did. It’s a lesson we can apply to our own financial decisions. While it’s always tempting to chase after windfalls and jackpots, it’s so much smarter to prioritize steady progress over short-term whims. The race to your goals is a marathon, not a sprint. A third thing we learned is how often things don’t go as predicted. In 2010 and 2011, many experts predicted a gloomy decade for the stock markets, and they had good reason to think so! But it didn’t happen. When, say, “Obamacare” became the law of the land, many experts predicted economic disaster. As of this writing, it hasn’t happened. When Brexit became a reality, many experts predicted a global catastrophe. As of this writing, it hasn’t happened. When President Trump was elected, many experts predicted a market meltdown. As of this writing, it hasn’t happened. We all have our opinions on whether events like these were good or bad, of course. But it’s a good thing we didn’t base our investment decisions on experts’ predictions! Because, if there’s one thing we learned this decade, it’s that a prediction is like a person’s appendix — pretty much useless. 2020 AND BEYOND With that in mind, I won’t make any predictions for the coming decade. If history is correct — and it always is — another market correction, another bear market, or another recession will come eventually. Whether it’s this year, next, or the one after that, I can’t say. What’s more important is that we remember this: It’s when we fly that we should have the healthiest respect for gravity, but it’s when we’re on the ground that we should raise our eyes to the skies. Investing is like trying to find our way in the dark, and our strategy is our North Star. It’s so much more valuable than any prediction! We may bump into the occasional obstacle. Sometimes, we may even trip. But if we hold to that star, we will keep moving forward in the direction we want to go. We will make this decade whatever we want it to be.

watched with fearful anticipation. It was like standing next to someone’s hospital bed, thinking every next breath will be their last. Some of this was probably a form of post-traumatic stress caused by the Great Recession. The rest came from the spasms of an ever-changing world. Oil prices plunged dramatically around this time, hurting both oil-producing nations and the energy industry. China’s stock market crashed. The Greek debt crisis reared its ugly head again, prompting fears that “financial contagion” would spread and create another global recession. And then came Brexit. The news that the United Kingdom would leave the European Union sent shock waves around the world. And here at home, one of the most bitterly contested presidential elections in U.S. history had both sides of the political aisle forecasting economic ruin if the other side won. But despite the dire predictions, these developments only slowed the recovery’s march rather than derailing it completely. In fact, by July 2016, the Dow once again hit new heights.

2017–19: THE LONGEST BULL MARKET While most of the decade had seen slow but steady growth, the horse started picking up speed as it neared the finish line, buoyed by tax cuts, increased government spending, and corporate earnings. Nowhere was this truer than with the Dow. Comprised of 30 of the largest publicly traded companies, the Dow hit 20,000 for the first time early in 2017 and closed well above 28,000 on Dec. 31, 2019.

Exactly 10 years before, the number was only 10,428. That’s an increase of over 170% — the culmination of the longest bull market in history.

Of course, it wasn’t all smooth sailing. The trade war with China is an ever-present concern, with rising tariffs often leading to brief but dramatic downswings in the market. 2018 was actually a down year for the S&P 500, the only one of the decade. And as the 2010s drew to a close, many economists warned of a slowing economy with maybe even a mild recession in store. Despite these warnings, investors did what they had done for most of the decade: act startled and then head right back into the markets. Some pundits call it a market “melt up ” instead of the usual meltdown. WHAT HAVE WE LEARNED? So, after a remarkable decade filled with twists and turns, what did we learn?

Happy NewYear! My team and I can’t wait to spend the next decade with you.

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