Let’s flash back to June 29, 2007—a date that forever changed the world. Apple debuted its first iPhone and they sold 6.1 million1 units over the first year. Since then, they’ve sold an estimated 1.9 billion iPhones1.
We are not reaching out to you today to talk about Apple, or iPhones, or sales results. What we want to reflect on is what life was like before technology took away paper maps. In all fairness, GPS navigation was around prior to the iPhone, but it wasn’t widely accepted…sorry, Garmin. Today, we know right where we are, all the time. When I get in my car at a certain time, my phone knows where I’m going (from my driving patterns and schedule), and it politely tells me how long it will take to get where I’m headed. Isn’t that nice 😊. Wouldn’t it be funny if the economy and stock market operated as succinctly? What if we experienced something like this? “Hey Jim, Happy New Year! It’s going to be a great year and your investments are going to rise by exactly 9.7%. Oh yeah, there’s a hazard ahead, so take this route.” Thanks, Siri!
The market is much fuzzier than that. Maybe blurry is a better word. Close your eyes and think back with us to a time where you set out on a road trip to a new place you had never been and all you had was your physical Rand McNally Road Atlas. Doesn’t that sound fun right about now…seriously? If you recall, you would have your map on your leg, one hand on the wheel, and quite often you would bob your head up and down as you tried to analyze signs and any markings that would help you answer the question – “So, where are we?” Perhaps that’s a good metaphor for where we are right now as an economy. We’ve never been here before, but we’re on the move. Let’s pull this VW Camper Bus (the best-selling vehicle in 19662) over and check out the maps we have in our proverbial glove box.
In each of the charts below, we compare some current year data points against 2 different backdrops. Backdrop #1: 2019 – This gives us a nice baseline to compare against since it was a strong economic year. Backdrop #2: 2020 – We’re not exactly sure what to call 2020, so we’ll let you call it whatever you want.
We could all predict a great year-over-year percentage change for retail sales compared to 2020, but 2019? Interesting.
We can’t stop looking at the teal. What a catastrophe. Thankfully, continuing jobless claims continue to trend in the right direction and have come a long way over the last year.
Hotel Occupancy is nearing 2019 levels. We would argue the demand in the coming months will likely preclude you from the travel you want to do…better book your stay now!
It seems not much has changed from 2019, but look at what the airline industry went through. Pre-COVID, over 2M travelers per day passed through a TSA checkpoint. Now, we’re pushing 1.8M….almost back!
Looks like the only thing we have left to do is go catch a movie 😊. Who wants some popcorn?
These graphs are interesting for sure. In fact, there’s a plethora of interesting data to analyze. You can cherry-pick lots of very detailed research to confirm just about any bias (things are getting better or things are soon going to be worse). Regardless of their content, are they helpful in showing us where we are? Unfortunately, not. Should we use any current information, whether good or bad to adjust our course? From our point of view, the emphatic answer is no. We’ve done this work for a long time. We’ve seen lots of market cycles, and we’ve learned a few repeatable truth’s:
- The economy and the stock market are rarely correlated except over the longest term. You will see the market going up when things seem bad and you’ll see it going down when things seem good. Often it just doesn’t make “rational” sense.
- We know from history that the market randomly and unpredictably goes down. A peak to trough drawdown of -14% every single year on average, and a more significant cliff dive of -30% every 4-5 years.4
- We know that temporary pullbacks can’t be forecast or timed with any precision. Over the average lifetime of an investor, there will be 16 major bear markets that take place. Yet, the S&P 500 is up nearly 320-fold over such a timeframe.4
- Since 1926, equity returns (with dividends reinvested) have been positive roughly three out of every 4 years. That’s 75% of the time! We’ve been through a lot worse in the past and we’ve managed to persevere to brighter days ahead.4
So, go ahead and put your “map” to a more predictable use, and dispose of your 5-pack of Wrigley’s Spearmint Gum that you paid a nickel for on your road trip in 1966 (It doesn’t cost a nickel anymore). Thankfully, one of the best decisions we can make when it comes to investing is to ignore the endless & biased pontification and wayward predictions to ultimately arrive at our desired destination. In the Spring of 2020, the S&P 500 bottomed out around 2,200, and as we write this, it’s hovering close to 4,000. As financial professionals and investors, it should not be the next -30% bear market decline that scares us, it should be missing out on the rebound that follows. The S&P 500 so far has never failed to recover its losses on its way to making new highs. Hang on! There are sure to be more twists and turns and moments where we feel lost, but the reward is only realized by stepping back and enjoying the ride.
Joel Malick currently maintains the Accredited Investment Fiduciary (AIF®) and Accredited Wealth Management Advisor (AWMA®) designations. Joel and his team at Steadfast Wealth Co. recognize that running this race for the long term is one of the greatest challenges you’ll face in your lifetime. Thus, they combine critical planning and investment strategies with real-life perspectives. Their consultation is provided at no additional cost to Alliance 403(b) Retirement Plan participants.
This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding any funds or stocks in particular, nor should it be construed as a recommendation to purchase or sell a security. Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested.
1) https://www.businessofapps.com/data/apple-statistics/
2) www.carprouse.com
3) https://www.ftportfolios.com/retail/blogs/Economics/index.aspx
4) Nick Murray May Newsletter Issue
The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S. Please note an investor cannot invest directly in an index.
Index performance returns do not reflect any management fees, transaction costs or expenses.
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