Wow, what a decade! While the 1920s are described by many as ‘roaring’, from a financial perspective, the 2010s really can make that claim. The stock market, as measured by the S&P 500, an index that represents five hundred of the largest companies in the US, returned about 256%, or 13.5% per year, compounded, for the decade. 2019 gave stocks a big boost as the return on the S&P 500 came in over 30%.
Now for the bad news – don’t expect to see 30% on your 2019 overall portfolio performance line! Why not? Indexes are great measures to gauge broad market performance and economic expectations, however, indexes can’t be bought. The closest thing is an index fund, however, even the lowest cost index fund will underperform its own index due to trading friction and fees. Secondly, just as you, our client, don’t own the S&P 500 exclusively, virtually no investor owns just an S&P 500 index fund. As advisors, we deliberately spread the investments around (asset allocation) into other assets such as bonds or international stocks. Some clients need their portfolios to produce more income to live off, while others don’t want to lose any money if and when the markets do poorly. Our job is to manage the risk and ensure that the amount of risk taken is equal to the amount that you are comfortable taking. Now for the good news - there may yet be a big double-digit performance number in your portfolio statement – you’ll just have to scan the ‘Equity’ section to find it…
So, when will the market ‘correct,’ or crash, you ask? Interest rates and unemployment are both low and wage growth is accelerating. We have spoken to and read several market-watchers and professionals who believe that this confluence can’t continue given their contradictory histories and simple math. Many economists have forecasted doom due to several rising headwinds around the globe. As of this writing, we remain cautiously optimistic that a major market correction doesn’t yet have a catalyst, although we remain cautiously positioned for when one does appear.
On a personal note, my father, Jeff Lasky, passed away in December. While not entirely unexpected, the amount of time that elapsed from his hospitalization to his death was only a few days. He did have some significant medical issues, but he was not terminally ill. My father was a very organized man when it came to the serious stuff (for everything else – he was the opposite!). He gave our family the great comfort of knowing that the details were in order for when his time came. I have heard from clients over the years how valuable this is and I have always believed it, but the experience provided validation. Ensuring that wills and estate documents are current is the perfect New Year’s resolution if yours aren’t. Focusing on it also provides time to reevaluate and reflect on your plans. My dad will certainly be missed by our whole family but he (a CPA born on April 15) would be proud to see me deliver this message in his honor.
We hope that 2020 brings you health, achievement, meaning and prosperity.
IMPORTANT INFORMATION: You should not construe the contents of this letter as legal, tax, investment or other advice. No representation, warranty or undertaking, express or implied, is given as to the accuracy or completeness of the information or opinions contained herein by Lionshead Wealth Management, its Member and its employees, and no liability is accepted by such persons for the accuracy or completeness of any such information or opinions stated herein. This information does not constitute an offer to sell or the solicitation of an offer to buy any security.