Although some of the items on the list faded away pretty quickly, some will leave a lasting impact on all of us. #8 on the list, to me, is the most important one. And even though the Quantitative Easing (QE) began in late 2008, it continued through 2014. Without it, I firmly believe the stock market would be significantly lower. QE was when the FED bought about Four Trillion Dollars of Treasury and mortgage securities in order to bring down long term interest rates in the U.S. In that regard, it worked and was a boon to real estate and paper assets like stocks and bonds. It did, however, bring a few side affects with it.
First, it has proven nearly impossible to reverse it without bringing down the whole economy and stock market. It allowed corporate zombies to survive. It caused investors to overreach for yield and turned baby boomers into a generation of unwitting speculators by binging on junk bonds and stocks. I suspect it will be a painful time for those investors when their overindulgence reverses. I say this because reversion to the mean is a powerful force and always follows investor complacency.
Second, valuations based on commonly used financial ratios are historically high and dividend yields are historically low. Except, it should be noted, when you have extremely low interest rates like we have now, high valuations and low dividends are easier for investors to accept.
Missing from the list is the Tax Cuts and Jobs Act of 2017, which juiced both the economy and the stock market, but mostly the stock market. But it adds 1.6 Trillion Dollars to the national debt over the next 10 years.So, like QE, it's good for now and probably not so good later on.
In any event, I like looking back because I will compare the next decade to this one so I could continue adding to my repertoire of perspective. Looking back for self reflection: good. Looking back for self-beating: bad.
What will the 2020's bring our way? Will inflation rise? Will the trade war with China get worse? Will the price of oil recover or will it take another big leg lower? Will foreign buyers of our Treasury bonds demand higher interest rates as incentive to keep buying them? Will the much talked about pension cliff become a reality? Will we have a recession? Will the stock market become more volatile? Or will everything work out just fine?
There's a difference between forecasting and fortune telling. The former is based on everything we know up to now and extrapolating a few months out at a time, i.e. making an informed decision. The latter is a play on one's biases, i.e. quackery. So, I can say that the forecast for the next few months, to me, looks pretty rosy. Then, in a few months, I'll reevaluate and re-calibrate. But the essence of good timing in the stock market is mainly about investing according to your own time horizon, goals, and risk tolerance. That won't change from one decade to the next.
Regardless, we'll keep investing to some degree because innovation is guaranteed to keep coming at us. It'll continue to disrupt, bring about new products and services, and bring economic growth and prosperity to the world. I thank my lucky stars that we live in a country where we investors could participate in this wonderful upside.