It really DOES depend where the lines are drawn.
Some of the feedback we hear from investors is, “this market has been great!” Our response is “it depends where the lines are drawn.” A better question to ask might be “since when?” More context is needed. A better reference is needed to agree or disagree whether markets were great, average, or something else. So, we often rebut our conversations with, “it depends where the lines are drawn.”
Using tools found on macrotrends.net, you can see the S&P 500 (2510 on January 1, 2019) is up 18% in the first six months of the year. Over one year, the S&P 500 (2726 on July 1, 2018) is up 8.7% (now 2964 before trading on July 2, 2019).
In fact, there was a market slump in May 2019 and we saw these kinds of numbers:
And it wasn’t just the Dow Jones Industrial Average. Look at the S&P 500, early June 2018 compared with early June 2019: (again, from macrotrends.net)
I’ll admit, I had cold sweats for a day, when seeing these numbers. And that’s primarily because many retirement accounts (like 401k accounts), will post their returns in rolling 12-month periods. This “could” have led to interesting conversations with clients, had markets stayed like this through June 30 (end of quarter). Investors would want an explanation how markets could return a measly 2% (June 4, 2018 to June 3rd, 2019)
In hindsight, this year we lucked out that statements mark the period from July 1 through June 30, and not June 4th to June 3rd.
As well, we also “lucked out” again, that while (many forget) the markets tanked in December, that created the opportunity for a great start to 2019.
So, it really does depend where the lines are drawn. And investors also need to remember that “returns are lumpy.” It would be nirvana if stocks slowly steadily climbed a certain amount each year, in nice, neat increments. But it doesn’t work that way, ever.
Here’s a reminder, posted right before the market had a swing (4th quarter 2018) where the Dow Jones moved from +9% on the year to down 12%, a 21% move from top to bottom:
In years past, some aggressive cowboy clients would balk when they learned we owned (some) bonds in their portfolios. Yet, as we are reminded today by LizAnn Sonders (https://twitter.com/LizAnnSonders) of Schwab and Bespoke Investments (https://twitter.com/BespokeInvest) that, the total return of long-term Treasury bonds (at the time of this writing) have outperformed the total return of the S&P 500. Not only year to date, but also over a much longer period. Again, that really depends where the lines are drawn.
We cannot stress this enough: investment returns need to be discussed “in the proper context.” It really depends where the lines are drawn.