I write this report in the first days of a new decade on what would have been David Bowie’s 73rd birthday. I always thought he was an amazing artist and his absence in the coming decade is just a reminder of the changes we’ll face in the next 10 years without the people in our lives we’ve lost — but we can also look forward to welcoming new lives, experiences, and opportunities. Unbeknownst to many, Bowie was very financially astute and an innovator in finance. In 1997, he raised $55 million by promising investors income generated by his back catalog of 25 albums — coining the term “Bowie Bonds,” interestingly described in this CNNMoney article.
The picture I have in my mind of Bowie is of an eternally young man full of energy and intrigue, but had he been an American citizen, he would have already been taking out his Required Minimum Distributions from his IRA — now required at age 72. Now that’s perspective for you.
We’re all young at heart, but as Bowie famously stated in his song, “Changes”:
Ooh, look out, you rock ‘n’ rollers…
Pretty soon now you’re gonna get older
As we stand in the face of changes in a new decade, you’re bound to have some trepidation regarding your financial future and the world in general due to perceived risks — whether it be personal circumstances, prospects of war, inverted yield curves, political machinations, an aging bull market, environmental issues, or any number of things. These trepidations might influence you to make mistakes — mistakes that can hold you back from receiving the full rewards the coming decade has to offer. Let me help you get some perspective by looking at the previous decade.
Imagine it’s early January 2010 and you are reading a review of the financial markets. You have been on a roller coaster over the past three years, living through the stress of the global financial crisis and market downturn of 2008-2009, then experiencing the recovery that began in March 2009 and is still going strong.
You rode out the market’s slide and are beginning to be rewarded. But the rebound is 10 months old, and markets have a long way to go to reach their previous highs. Opinions are mixed about what might unfold in the coming year. A December 2009 headline in the Wall Street Journal underscored the uncertainty: “Bull Market Shows Signs of Aging.”1 The publication pointed out that although stocks have rallied and indices are on the rise, worries are mounting in some quarters that the market is running out of steam.
From the vantage point of early 2010, you may be wondering whether to stick with your investment plan or move into cash and wait for more evidence that the markets have recovered. Now, fast forward to today and consider what the global equity markets delivered to investors who stayed the course this past decade.
On a total return basis, global stocks more than doubled in value from 2010-2019, as Exhibit 1 shows. The MSCI All Country World IMI Index, which includes large and small cap stocks in developed and emerging markets, had a 10-year annualized return of 8.91%. From a growth-of-wealth standpoint, $10,000 invested in the stocks in the index at the beginning of 2010 would have grown to $23,473 by year-end 2019.
” Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio. Past performance is not a guarantee of future results.”
Despite positive annual market returns during most of the past decade, you had to process ever-present uncertainty arising from a host of events, including an unprecedented U.S. credit rating downgrade, sovereign debt problems in Europe, negative interest rates, flattening yield curves, the Brexit vote, the 2016 U.S. presidential election, recessions in Europe and Japan, slowing growth in China, trade wars, and geopolitical turmoil in the Middle East, to name a few.
So here’s one of the great lessons of the past decade or any decade for that matter: capitalism is the ultimate sustainable ecosystem. It’s a robust system that has rewarded those invested in its risk the right way. For every instance of bad news or events you see, there is a birth of multiple opportunities you don’t see. For example, despite the events that had you worried, the decade also brought technological advances in electronic commerce and cloud computing, the global embrace of the smartphone and social media, increased automation and enhanced artificial intelligence, and new products like electric cars and early iterations of self-driving ones. Who could know?
Here’s what we can learn from the past decade (and the ones that came before it): despite all the change and uncertainty, the fundamentals of successful investing endured. Diversify across markets and asset groups to manage risks and pursue higher expected returns. Stay disciplined and maintain a long-term perspective. Take the daily news with a grain of salt and avoid reactive investment decisions based on fear or anxiety. Don’t try to predict future performance or time the markets. Instead, develop a sensible investment plan based on a strong philosophy — and stick with it.
Investors who follow these principles can have a better financial journey in any decade.
So yes, there will be changes and challenges in the coming decade. Just don’t forget about the the opportunities those changes and challenges will provide for prudent investors. You may be getting older, but there’s still some rockin’ and rolling to be had.
Indexes Through December 2019
Table disclosures and (http://worthpointeinvest.com/disclaimer/) performance for periods greater than one year are annualized. Selection of funds, indices and time periods presented are chosen by the client’s advisor. Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio. Past performance is not a guarantee of future results. Russell data copyright © Published and maintained by FTSE Russell, a subsidiary of the London Stock Exchange Group,, all rights reserved.www.ftse.com The S&P data are provided by Standard & Poor’s Index Services Group. www.spdji.com MSCI data copyright © MSCI 2013, all rights reserved. www.msci.com. Barclays Capital data provided by Barclays Bank PLC. www.bloombergindices.com.
1 “Bull Market Shows Signs of Aging,” The Wall Street Journal, December 7, 2009.
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