Holding Steady in Rough Seas

Sunlit Surf

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James E. Houston, CIM, FCSI

December 28, 2018

Image used with permission: iStock/shaunl


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Holding Steady in Rough Seas

As 2018 draws to a close, and at the time of this writing, it would appear that the S&P 500 U.S. stock market index is unlikely to close above the level of its previous year-end close (2,674).

If that proves to be the case, it will only be the third time since the financial crisis of 2008/09 that the S&P has not had a positive calendar year return. In 2011, the S&P was virtually flat (down 0.04 points), and in 2015 it declined by less than one percent. Including dividends, the S&P has had a solid nine year run of total return gains. It’s been easy to get used to. Of those nine years, 2017 was perhaps the most idyllic. During that year, the index did not experience one correction of more than 5%, the CBOE Volatility Index hit a low not seen in 24 years, and the total return of the S&P was 21.8%. That’s a tough act to follow.

With investing, as with so many other things, recent experience has a material impact on people’s expectations. Considering that the S&P peaked in late September 2018 and has fallen considerably since then, it is not surprising that investors are now expecting that these declines will continue. The market weakness experienced in the fourth quarter can test the resolve of investors. It can also serve as a reminder of why it’s important to have a strategic asset mix. While we don’t know whether the market will continue to decline over the short term, we do know that, in the past, equities have been the primary source of tax efficient real growth in clients’ portfolios, and that resolutely sticking to one’s strategic asset mix has proven to be the right strategy. We, at Nexus, have each experienced multiple market cycles and recognize how disheartening down markets can be. We have also seen how a well-prepared financial plan, an appropriate asset mix and personal support can give our clients the confidence to endure times like these.

For those who find it difficult to weather volatile markets, Warren Buffet offered up some excerpted Rudyard Kipling in his 2017 Berkshire Hathaway Shareholder’s Letter:

“If you can keep your head when all about you are losing theirs…
If you can wait and not be tired of waiting…
If you can think – and not make thoughts your aim…
If you can trust yourself when all men doubt you…
Yours is the Earth and everything that’s in it.”

And while we are with ancient poets, this is the time of year for remembrance and “Rabbie” Burns’s Auld Lang Syne.

“Should old acquaintance be forgot,
And never brought to mind?
Should old acquaintance be forgot
And Auld Lang Syne?”

At Nexus, we are not just turning over a New Year, we are turning the calendar on our 30th year. Far from our acquaintances being forgotten and never brought to mind, we want to thank all of our clients and friends for thirty years of support and friendship.

May you all have a Happy and Healthy New Year!

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