Will we have a recession? Is it coming? The answers to both those questions are yes; but, please keep reading. What nobody truly knows is when a recession will actually take place. Economist use charts, data, surveys-all of which are great but provide no clear indication of a recession. I’ve been hearing and reading that a “recession” has been coming for the last 3 years. In that time, the S&P is up a paltry 45+%. Perhaps we are talking ourselves into a recession but 3 years is a long time to be “talking”.
Over the last few weeks, volatility and the political mudslinging has intensified. This certainly doesn’t make anyone feel good. Between China, Syria and impeachment, there is undoubtedly cause for concern.
Clients would like to believe that we have a crystal ball and that we can move in and out of the markets avoiding collapses and capitalizing on upswings. We aren’t soothsayers and I believe market timing is a fool’s game. In fact, research firm Dalbar looked at investor returns relative to the markets and what they found wasn’t surprising. Investors in equity funds have actually lagged the S&P 500 by an average of almost 5%. Why? They believe that a primary driver to this outcome is poor timing or “buying high and selling low.” You may get lucky once…maybe even twice but the odds are certainly stacked against you. Additionally, and we’ve mentioned this before, missing out on the best days in the market can drastically impact your returns-and I don’t mean in a good way. J.P. Morgan calculated that if you missed out on the best 10 days of the markets from January 1, 1999 to December 31, 2018, your overall return was cut in half. Don’t miss the good days!
Many of our clients have heard me tell the story about my experience on election night in 2016. The Dow Jones, in pre-market (before the markets open and an indication of how they will open) was down over 900 points. I prepared myself for a bloodbath and was ready to write to you like I’m doing now. As the day unfolded, the entire financial community, myself included, watched as the markets once again did the unexpected. By end of day, the Dow was up 72 points-almost a 1,000-point swing. Moves like this are not for the faint of heart. Looking back now, that huge move was simply a blip on the radar.
Right now, we are not recommending any major changes to our portfolio’s. The bottom line here is we don’t know when the next recession is going to take place. Nobody does. What we do know is that if history is any indication, our eyes will see Dow rise to 100,000. Will there be recessions until we reach that point? Absolutely. Should it impact our day-to-day investments? Absolutely not.