Wrapping Up 2015

By Steven Higgins, Financial Advisor, Principal

You Don’t Believe in Santa Either?

Investors did not get what they asked for for Christmas this year.  Year-end came and went with no gift of positive returns.  December was a representative of the entire year…a disappointment with U.S. stocks finishing flat for the year.  We hesitate to call it “bad” because “bad” can be much worse.  The technical term for 2015 should be “lame.”  It seems all the scary headlines and fear were completely wasted.  This “lame” market couldn’t even go down.  In July, we witnessed our first stock drop of over 10% since 2011, but investors were resilient and stocks came right back.  However, investors seem only confident enough to tread water.  There have only been four times since 1929 has the S&P 500 finished within 1% of where it began the year.  So, if you want to put a bow on 2015, consider it a gift…you were part of history.  Any good “year in review article” should include some highlights, so let’s re-cap some of the stories that failed to move stocks in any direction: interest rate hype, President Obama, Greece is broke, ISIS, Russia, oil plummeting, China stocks obliterated, Trump, terrorism, riots in Greece, riots in the U.S., Paris attacks, refugees, Deflategate, more interest rate talk, Congressional budget battles, oil drops even lower. Oh, the memories.

The Upside

We are 15 years in to this fresh new century and U.S. stocks, as measured by the S&P 500, have returned only 2.6% per year.  Nobody really uses 15 year rolling periods, but as it stands, it might be the worst 15 year period for stocks in a long time.  How in the world is that the good news, you ask? Since its inception in 1928, the S&P 500 has returned about 10% per year.  If the first 30 years of this century turn out to be average, the S&P 500 would need to return 17.4% per year for the next 15 years.  That would grow $100,000 to about $1,200,000.  If the returns for the first 30 years of the 2000s turn out to be 5% per year, just half the historical average, the next 15 years would have to yield a return of  7.4% per year.  That would grow $100,000 to over $250,000.  We know that time usually tells us that averages mean something and that they are made up of cycles.  As unlikely as this may sound to you right now, we think you’ll want to be part of this cycle.

What the Heck is Film?

True, stocks have let us down and have failed to meet our expectations, but have companies let us down? In the year 2000, still only a few people had cell phones and those phones were basically just used for talking…crazy huh? On Friday nights everybody rushed to the Blockbuster Video store to get their hands on the limited supply of new release DVDs and nobody had ever heard of Netflix.  Only about 15% of Americans were online, and we used “dial-up.” The term “wi-fi” didn’t mean anything yet.  Nobody could figure out how Google made money and Amazon sold some books.  Nobody texted, Apple was about to go bankrupt, and we used film in our cameras. Most people had a camera.  The first Tesla wasn’t on the road yet and the first Toyota Prius hybrid vehicle was sold in the U.S. Nobody had heard of an iPod, and now they are relics of the past.  Facebook’s founder, Mark Zuckerberg, was 16. The first human genome was sequenced after decades of research and over three billion dollars of investments.  It cost over $100,000 to have your genome sequenced and only 20 people in the world had done it because of the scarcity of scientists and equipment.  You can now have your genome sequenced for less than $1,000.  In the new age of custom medical treatments, this is a revolution!

All Aboard?

If you are looking for a reason to look forward because looking back is painful, consider this: technology breeds more technology. Better computers allow companies to make even better computers, better computers allow scientists to do more research, and more research leads to the answering of questions and the curing of disease.  For fifteen years we have been wowed by technology for the sake of technology.  Now as technology is deployed in every industry, new efficiencies are created, and productivity increases.  As industries find new ways to create and develop new products, companies make more money and you as an investor could be rewarded.  Now for those who contend we are in a stock bubble with an over priced market: 15 years of less than 3% returns, almost 18 months of no stock market growth, and month after month of complacency as statements at best look like the one from the previous month does not sound like “irrational exuberance.”  Over the next 15 years, there will be rough times.  There could be a recession or two, there could be “crashes” in the stock market, and there could be negative years.  But when you look back, will you have been part of progress and growth and were you able to meet, maybe even exceed, your goals?  The last 15 years were not great, however they were still positive.  What will the next fifteen years mean for you and your goals? 

At Higgins & DeYoung, we don’t do hype.  We create powerful strategies that help our clients reach goals.  We want to be be your financial advisor.  Check out Higgins & DeYoung for more information.

Data source: Yahoo Finance