Quarterly Investment Update

In the world of investments, everything worked last year.

International stocks were up 22%, emerging market equities were up 20%, and U.S. stocks (S&P 500) were up 31.5% ! (Who would have thought a 20% return could feel so disappointing?) Bonds also turned in nice single digit gains, but looking back stocks were unquestionably the place to be for 2019.

It’s quite easy to become giddy over a 31.5% gain – five straight years of that performance would nearly quadruple your investment! – but context is always critical. The gains of 2019 followed a down year for stocks (a loss of 4.4% in 2018), including a miserable fourth quarter (down 13.5%). From the 2018 market peak in September, stocks fell almost 20% over the next three months. It is not fun to stick with stocks after a sharp decline, but that fortitude is generally rewarded eventually.
We should also note that the measurement period can make things look better or worse than they actually are. In this instance, the calendar year happened to be a friendly timeframe. Measuring the return over five quarters instead of four (i.e. including the last quarter of 2018) results in a gain of 13.75%... very nice to be sure, but not nearly as impressive. The annualized return for the two-year period (2018 and 2019) was 12.1% per year – still great, but not awe-inspiring.

The reality of investing is that big, amazing years help offset mediocre and down years, resulting in the β€œ generally pretty good ” long-term average results. It can sometimes be a long and winding road, but it’s the way it has always been when it comes to stock investing. We will do our best to help you maintain an even keel through both good and bad markets as they come along. 

Warm regards,

The LPP Team
Life Planning Partners, Inc.