Where in the market are we going to look to help combat a negative 12-year nominal return?
This question is terribly negative. So, let’s see if we can lighten our mood a little!
Last week we unpacked Dr. Hussmann’s article which predicted a return of -0.95% over the next 12 years in a 60/40 model. It would appear on the surface to be doom and gloom as you look at the S&P500. However, as a client of Sound Financial, the S&P500 is not what you should compare your accounts to. Our investment framework follows a set of rules and trends and this allows us, in our opinion, to be where history has shown returns. When we look back at the year 2000 there are many similarities. Clearly, the big difference is in 2000 there was not a global pandemic.
The rest is good news! Because, we can look in history to find similar markets, i.e. 2000. We then look into the 2000-2010 decade, breaking this research down thoroughly, to determined what worked in that period. We can then build your investment models to take advantage of what we think will grow well now and in the near future. Because “history doesn’t repeat itself, but it often rhymes,”this gives us a lot of confidence in what we are seeing and interpreting in the markets. However, this process does not guarantee results, but in our opinion, it will help put you, our clients, in the best possible position for your financial future.
What should investors or clients be looking at or following based on where we are in the market cycle?
That’s depends on your personality, capacity, and interest. You should not feel obligated to watch anything regarding the markets. For example, Danny Matthews is one of the founders of Sound Financial Strategies. He managed money for over 30 years and now as a retiree he rarely studies the market. However, if you want to watch the markets our weekly VLOGs, quarterly webinars, and calls with your advisor are meant to provide you essential education. Beyond this, we believe this advice should be tailored to you. So, please ask your advisor what news or benchmarks are best for you to follow.