Founding Principal & Managing Director, Craig Robson
Have you noticed? It’s happening. For many, the fears and uncertainties of 2020 are washing away and now, many of us are beginning to see the world through an optimistic lens. I’m seeing it with capital markets and the economy. Many economists are already raising their 2021 forecasts. For example, AllianceBernstein recently raised their 2021 global GDP from 4.8% to 5.9%.1 And, as of March 31 the S&P 500 is up 6.17% year to date2, and 80.7% over the past 12 months (3/24/20-3/31/21).3
With this positive trend, I’ve noticed an increase in two themes. The first, waiting for a future market pullback, before investing additional capital. While we all would love to time the markets, the reality is it’s very difficult. Since 1928 the S&P 500 has averaged 7.76%, with positive returns two out of every three years. If you could remove those extremely negative years (losses greater than negative 10%), the S&P 500 averaged 14.89%. And, if you only considered the positive years, it averaged 18.50%.4 My point being, are you willing to hold off for the next 5% pullback considering the markets may go up 18.50% before that happens? In my professional view, periodically re-assessing one’s pain threshold, when it comes to accepting losses, is the best way to formalize an investment decision.
The other theme I’ve noticed, is the continual lack of quality income within traditional income solutions. For example, at the end of 1980 one could invest less than $10,000 in the US 10 year treasury bond and generate $1,000 of annual income. As of December 31, 2020 an investment of $108,000 would be required to generate the same!5 While no one knows when this historically low interest rate environment will change, it’s reasonable to accept we will need to continue searching for new or alternative investment opportunities when sourcing quality income streams.
As we all continue to look to the future, I’m curious what new habits you’ve picked up over the past six to 12 months, or one that you’ve dropped? For me, it’s something as simple as no longer purchasing a cup of coffee on my way to the office. While I’m still an avid coffee drinker, and I must have my early morning cup of coffee at home, I no longer need to stop on my way into the office. I broke that habit when I exclusively worked from home for five months last year, and I don’t see myself starting back anytime soon, if ever (my apologies to all of the local coffee shops).
In closing, I leave you with a quote from the American inventor and businessman, Thomas Edison, “Good fortune is what happens when opportunity meets with planning.”
- Craig Robson
- Founding Principal and Managing Director