After at least four consecutive weeks of growth, the three major domestic indexes all lost ground last week. The S&P 500 was down 0.44%, the Dow lost 0.49%, and the NASDAQ declined 0.15%.
This week, the Fed meets to determine whether or not to raise benchmark interest rates for the first time in 2017. Right now, the market gives a 93% chance of a rate hike.
In this update, rather than analyzing what lies ahead or what happened last week, we would like to acknowledge just how far the U.S. economy has come since 2009.
On March 9, we marked the 8-year anniversary of when markets during the Great Recession hit the bottom on their lowest day. At that point in the economic meltdown, the Dow and S&P 500 had both lost more than 50% of their value since October 2007. Every investor likely remembers the fear that gripped the U.S. and global economies, as questions lingered of how low we could go.
Today, we can see just how far the markets and economy have come since March 2009 - and the growth investors could have missed if they avoided the markets. Take, for instance, the S&P 500.
On March 9, 2009, the index fell to 676.53. Eight years later it rebounded to 2364.87. With reinvested dividends, that growth represents an average annual increase of 19.45%. And the fundamental data tells a very similar story.
Four Economic Measures: From March 2009 to Today
- Gross Domestic Product
March 2009: We learned the economy had fallen by a 6.3% annual rate during the fourth quarter of 2008 - its largest decline in 26 years.
Today: GDP recovery has been more plodding than many people might prefer, but nonetheless, nearly every quarter has shown growth since 2009. And over the past two years, GDP has increased at a 3.2% annual rate. - Home Prices
March 2009: The median home price was $169,900.
Today: The most recent data from January 2017 indicates that median home prices have increased to $228,900 - a 34.7% increase since March 2009. - Unemployment
March 2009: The unemployment rate was 8.7% and would climb to 10% by October 2009.
Today: The most recent data from February 2017 shows an unemployment rate of 4.7%. - Total Employment
March 2009: The economy had lost millions of jobs during the recession and would continue to lose millions more throughout 2009.
Today: As of February 2017, the economy has added nearly 12 million jobs since March 2009.
Throughout this economic recovery, people have seemed concerned the bull market was about to end. When discussing the bottom of the market 5 years ago, we wrote about many analysts' worries that a pullback was imminent. Even last year, one MarketWatch columnist wrote an article titled "Happy Birthday Bull Market - Now Write Your Will," warning that the markets would not reach new peaks in the near future. The S&P 500 has gained around 19% in the months since then.
Of course, no one can predict exactly when this bull market will begin to decline. And at 8 years old, only one recovery has lasted longer since World War II.
As always, we will continue to offer the advice we believe suits your best interests in every market environment: Focus on your long-term goals and personal needs, not headlines and emotions. We have come a long way in 8 years, and we will continue to guide you through the market's changing times and inevitable fluctuations. If you have questions about where you stand today or how to prepare for tomorrow, we are here to talk.
Quote of the Week
"It takes as much energy to wish as it does to plan."
--Eleanor Roosevelt
Golf Tip of the Week
New to Golf? Avoid These Mistakes
As a new golfer, you have many tricks of the trade to learn as you perfect your game. However, if you want to advance more quickly, start by avoiding these three mistakes:
- Not using properly fitted clubs
New golfers often use clubs that don't fit their current abilities and playing style. Just because you find a set for sale or purchase the top brand on the market doesn't mean they're the right clubs for you. If you keep having problems with your swing, you may be using improperly fitted clubs. As a beginner, you want a good balance of forgiveness in your clubs mixed with control. As you start to improve, you'll want to make sure you upgrade your clubs to reflect your new skill level. - Neglecting your club's grooves
You know those times when you know you nailed your shot with the perfect stroke and backspin - and then it just falls flat without any spin? Many factors can cause this to happen, including the ball, club, or technique. On the other hand, your club's grooves could be to blame. They need to be neat and clean to support the shot, especially if you're using lofted clubs. Start a habit of checking and cleaning your grooves after every shot and before every game. If you keep them clean and still see your performance and spin falling, you probably need a shop to re-groove your clubs. - Overemphasizing distance and power
These days, golfers often focus on distance over finesse and accuracy. And manufacturers design clubs to hit monster distances. As a result, new players often hit the ball too hard, thinking that if they swing hard enough, the ball will travel faster. What really happens, however, is you lose balance, tempo, and rhythm in your swing - and you might miss the ball's center. You are also more likely to close your eyes, damaging your concentration and accuracy. Instead of focusing on speed, put your efforts into having a consistent swing that hits the ball's center. Only after mastering your swing should you think about trying to pick up the speed.
Financial Question of the Week
Am I holding too much cash?
Many investors hold large amounts of cash as they await the next market downturn and seek safety of principal. But is this the best strategy?
Although return expectations for investments aren't what they used to be, by staying overweight cash, you may be missing out on years of compounding returns. And cash is not just earning little to no return, it will also lose purchasing power during times of inflation. While keeping some cash in your portfolio can be a good thing, it is extremely easy to make the mistake of keeping too much cash for too long.
The amount of cash you hold should be dependent on:
- Your emergency reserve need (Typically 3 - 6 months of expenses)
- Your short and long term financial goals
- Your risk tolerance
Although many investors use large cash positions to manage risk, this is not a prudent investment strategy. There is a large world of alternatives available to risk averse investors that may better help them to accomplish financial goals.
Please contact our office if you would like to review your financial position, determine an appropriate amount of cash reserves to maintain, and discuss prudently investing any excess cash utilizing investment programs that are in your best interests and aligned with your risk tolerance.
