January 2020 Financial Markets Summary

As we turn the page to 2020, let’s pause to review this eventful past decade.

Domestic stock markets performed quite well coming off the depths of the financial crisis.  According to Goldman Sachs, the trailing 10-year annual return for the S&P 500 ranked in the 94th percentile of all 10 year periods going back to 1880.  Growth stocks and technology stocks in particular, led the way by outpacing the value index by over 2% per year.

The current economic expansion hasn’t been the strongest on record, but it has been the longest at almost eleven years.  During this expansion, the unemployment rate dropped from 2010’s 9.9% all the way down to the current record low of 3.5%.

There was also no shortage of market impacting activity from Capitol Hill.  The Federal Reserve stepped in to help drive economic growth with their significant stimulus package via quantitative easing.  They also slashed the Federal Funds rate to the unprecedented 0% level.  This low interest rate policy and tax reform helped to drive a portion of domestic returns.

The past decade treated domestic stocks very well, but not all other assets around the world.  The Chinese stock market is still in negative territory over the trailing 10 years.  Commodities also generally struggled with over a 30% pullback during the decade.  Oil prices experienced a 70% decline from 2014 to 2016 due to the increased supply from fracking in the U.S. shale fields.  However, these sharp changes don’t even compare to bitcoin and other cryptocurrency’s wild ride.  Bitcoin started trading in 2013 around $120 and skyrocketed all the way to $20,000 only to be followed by a collapse down to $3,100.

Europe continued to transform as they dealt with a debt crisis in Greece, Portugal, Ireland, Spain and Cyprus.  The rise in populism and recent move for the UK to exit the European Union suggests that more change is likely to come.

The past decade is certainly another example of our time-tested belief that “today’s headlines and tomorrow’s reality are seldom the same.”  The next decade will look completely different than the past.

 

Asset Index Category Category Category 5-Year 10-Year
3 Months 2019 YTD Average Average
S&P 500 Index – Large Companies 8.5% 28.9% 9.4% 11.2%
S&P 400 Index – Mid-Size Companies 6.6% 24.0% 7.2% 11.0%
Russell 2000 Index – Small Companies 9.5% 23.7% 6.7% 10.3%
MSCI ACWI – Global (U.S. & Intl. Stocks) 9.1% 26.3% 8.3% 8.9%
MSCI EAFE Index – Developed Intl. 8.1% 22.0% 5.7% 5.5%
MSCI EM Index – Emerging Markets 11.8% 18.4% 5.6% 3.7%
Short-Term Corporate Bonds 0.6% 4.7% 2.0% 2.2%
Multi-Sector Bonds 0.2% 8.7% 3.1% 3.7%
International Government Bonds -0.6% 4.0% 2.1% 1.2%
Bloomberg Commodity Index 4.4% 7.7% -3.9% -4.7%
Dow Jones U.S. Real Estate 0.8% 28.9% 8.4% 12.0%

 

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment, strategy, or product or any non-investment related content, made reference to directly or indirectly in this newsletter, will be suitable for your individual situation, or prove successful. This material is distributed by PDS Planning, Inc. and is for information purposes only.  Although information has been obtained from and is based upon sources PDS Planning believes to be reliable, we do not guarantee its accuracy.  It is provided with the understanding that no fiduciary relationship exists because of this report.  Opinions expressed in this report are not necessarily the opinions of PDS Planning and are subject to change without notice.  PDS Planning assumes no liability for the interpretation or use of this report. Consultation with a qualified investment advisor is recommended prior to executing any investment strategy. No portion of this publication should be construed as legal or accounting advice.  If you are a client of PDS Planning, please remember to contact PDS Planning, Inc., in writing, if there are any changes in your personal/financial situation or investment objectives.  All rights reserved.