Hold the line!
Welcome to 2016! Where the market is giving everyone the heebee-geebees! We’ve been to this dance before folks, and we’re watching who’s pulling the strings. And the truth is: nobody knows where the market is heading next or how long the this roller coaster will last.
We’ve had a couple of years of flat to negative returns and everyone is getting itchy. My friend, Dan Wheeler, formerly with Dimensional, has a great analogy about when firemen earn their money. It’s when there’s a fire. And right now…it seems like Wall Street is ablaze with crashing oil prices and China’s economic policy messes.
One of my jobs is to provide a little bit of historical perspective and clarity:
The stock market has been down 25 out of the last 87 Januarys on record. That’s 28.7% of the time. Over the next 12 months, 28% of those 12 month periods ended down. This is examining data starting from the February of the year of a down January to the next January. Next, we looked at ten-year returns following every January that the market started down. Out of 21 data points, all 21 10-year periods ended up. The average positive return was 12.33% per year. [That represents a tripling of a deposit over 10 years.] The mix was 25% large (S&P), small, large value (Fama/French), small value – and that’s just the US portion.
For those predicting calamity, beware of sales pitches from certain big brokerages. Like RBS. Isn’t this the same RBS that got taken in by Bernie Madoff to the tune of $600 million, had a 5 year stock performance of -34.68% (according to Financial Times) and had to take a bank bailout in 2008? Ignore the calls.
Below is a short video of Mark Matson, one of our managers, on the FOX Business Network providing the right message on the Global Bear Market.