Happy 10th Anniversary?

“10th Anniversary of what?” you may ask. Well, it appears you are not the only one in a state of ignorant bliss – no offense intended! I thought it may have been a bigger deal in the news, but very little has been written or reported about this 10-year milestone.

yellow balloon beside white balloon
Photo by PhotoMIX Ltd. on Pexels.com

Newsflash: Things are (mostly) GOOD in the economy, businesses and peoples’ financial lives in the US these days. Don’t take my word for it. Just this week The Wall Street Journal ran an article leading with: “The job market doesn’t get much better than this.”* The title of the article was, “Inside the Hottest Job Market in Half a Century.” Wages on average in the US are rising modestly after “long-term stagnation” (their words not mine), and unemployment is the lowest in 50 years – with women experiencing some of the greatest gains in workforce participation.

BUT – it was 10 years ago this weekend on March 9, 2009 that the US stock market hit its low, with the S&P 500 index ominously touching 666, only to settle around 2750 this week. Ten years ago, the US (and global) economy was in “The Great Recession” and it was ugly. But then, yes, the S&P 500 took its time and has risen in value over four (4) times in roughly 10 years. There have been a few bumps – amidst higher interest rates – but stocks in the US and globally are materially higher which has created and grown wealth along the way.Is this reason for celebration?? For the optimists among us, getting up in the morning is a reason for celebration. For the “realists”, yes, this long-term gain by the US stock markets is still a reason for celebration. For what?

  • somewhat low inflation
  • slowly increasing interest rates and wages
  • new business creation
  • companies needing to hire
  • savings in retirement accounts (IRAs, 401Ks, 403Bs) having grown.

There is a small caveat, however. Just because “the stock market” has gone up 313% since the market bottom in March 2009 does NOT mean that YOUR PORTFOLIO has gone up 313%. Here’s why:

  • Risk averse investors may have “gone to cash” in March 2009 and missed the swift (12 month) recovery following the low
  • Asset allocation is usually not 100% stocks

And why a celebratory mood is still called for:

  • Investors willing to take and pay for advice realized in 2009 and realize now that sticking with an Asset Allocation, Diversifying and Rebalancing are three of the best defenses amidst extreme volatility
  • Asset Allocation, Diversification and Rebalancing (and not market timing) can grow wealth, albeit slowly and over the long-term, 7 to 10+ years
  • Taxes are a part of life but can be minimized (Roth 401k, Roth conversions)
  • Fees for investment management have come down
  • Fiduciary relationships with an adviser are MORE IMPORTANT THAN EVER.

I am in a celebratory mood on Fridays by definition. How about you?

Source: WSJ.com Eric Morath and Lauren Weber, “Inside the Hottest Job Market in Half a Century.”


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