A Charlie Brown Christmas – Stock Market Edition

Ryan George, Assistant Vice President of Marketing and Communications
December 27, 2018

“Good grief!” It seems no matter how you look at it—December has been rough for stocks. With so much bad news in the headlines, it’s important for investors to remember the true meaning of investing.

 

A Dreadful December

Global stock markets just can’t catch a break. As of market close on Friday, Dec. 21, trailing three-month declines for the MSCI Emerging Markets Index (down 7.16 percent), the S&P 500 Index (down 15.38 percent), the Russell 2000 Index (down 22.69 percent) are the worst we’ve seen since 2008.

Even though it’s been over 10 years, the scars of the Great Financial Crisis remain, and this year’s dramatic year-end drop has resurfaced the anxiety and uncertainty among many investors. News headlines haven’t helped. Even those wise enough to turn away from the daily ticker have been greeted with political unrest in the forms of a government shutdown showdown, a shake-up in President Trump’s Cabinet, ongoing trade tensions, an interest rate hike from the Federal Reserve and signs of slowing economic growth in the U.S.

As Charlie Brown would say, “Good grief!” It has been a tough few weeks. But just like Charlie did in a “Charlie Brown Christmas,” investors can lean on some key principles to rediscover the true meaning of investing.

 

Predicting the Future is Fraught with Uncertainty

“Oh no, we’re doomed.”

“This will be the worst Christmas play ever”

Cast of Christmas Play

When markets experience sharp sell-offs, it’s easy to allow the crescendo of uncertainty and anxiety to drive our decisions. To make things worse, there’s an infinite amount of market prognosticators with misplaced confidence looking to take advantage of investor panic.

Human beings have not mastered the ability to predict the future accurately, but that rarely stops market analysts, financial advisors and investors from mistakenly believing they know what’s to come.

Here’s the truth: The future is unknown, and uncertainty about the events that will impact global stock markets in the coming months and years is no lesser nor greater than it was six weeks, six months or even six years ago.

 

Timing the Market Means Being Right Twice

“It's too early. I never eat December snowflakes. I always wait until January.”

– Lucy Van Pelt, Psychiatrist

Research has proven time and time again that successfully timing the market over long periods is not probable. For starters, forecasting systemic risks is extremely difficult. Unknown probabilities and magnitudes of various market risk scenarios can make even the most appealing market timing strategies quickly proven wrong.

Another main reason is that to be successful, you would have to be “right” not once, but twice – making the right call getting out and then the right call to buy back in. In fact, missing the mark by even just a few days can dramatically reduce your long-term returns. (Click here to read “The Cost of Market Timing.”)

Though past performance makes no guarantee of the results we will see in the future, U.S. stocks have historically rebounded after periods of negative performance.

Chart equity returns as of January 2018. Source: Annual U.S. equity returns for the period of 1825 through 1925 are republished from “A new historical database for the NYSE 1815 to 1925: Performance and predictability” by William N. Goetzmann, Roger G. Ibbotson and Liang Peng as published in the Journal of Financial Markets 4(2001) 1–32, pp. 27–30 using the “Total return with low dividends” return series; annual U.S. equities returns for the period of 1926 to the most recent year end are that of the Ibbotson Associates SBBI US Large Stock Total Return Index (USD) obtained from Morningstar Direct.

 

Trusted Advice Should be Your Guide

“I love the beautiful sound of cold, hard cash. That beautiful, beautiful sound. Nickels, nickels, nickels. That beautiful sound of plunking nickels. Now what seems to be your trouble?”

– Lucy Van Pelt

It’s times like these when guidance from a trusted advisor is needed most. It’s not easy to stay the course when your emotions are trying to overcome your logical thoughts and reasoning abilities. Keeping focus on your long-term promises and not letting fear overshadow your vision of your future is essential in helping you make wise investment decisions.

Trusted financial advisors and wealth management professionals know that they must listen carefully to their clients in order to fully understand the promises their clients want to keep for their loved ones. This thorough understanding of the truth behind your intentions and dreams is what empowers them to provide their clients with comprehensive and competent plans of action no matter the scenario.

 

Always Remember What Investing is All About

“For, behold, I bring your tidings of great joy…

…which shall be to all people.”

– Linus

When a sad-sack Christmas tree pushed Charlie Brown to his breaking point, it was Linus, clutching his blanket, who stepped into the spotlight and reminded the Peanuts gang what Christmas was all about with a reading from the book of Luke.

When it comes to investing, knowing what you believe is paramount during times of turmoil. When the road ahead becomes foggy, knowing what you believe helps illuminate the path before you more clearly and supports the conviction needed to meet your long-term financial goals.

1st Global is committed to this philosophy as a journey of discovery and intelligence. At 1st Global, our Investment Management Solutions (IMS) platform and investment programs are shaped by 11 well-defined beliefs that guide our process, determine our actions, influence our investment management decisions and serve as the truths and principles behind our investing philosophy.

These beliefs support our purpose to help the clients of our partner wealth management firms honor the important promises they make and enable intentional living.

Before beginning any journey, before committing any of your money, wealth or time, before taking action that will change your life, know what you believe. A solid foundation will help you possess the clarity you need to persevere in your journey, your investment plan and your promises to loved ones.

 

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All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. This commentary should not be considered a solicitation or offering of any investment product. Neither asset allocation nor diversification assures a profit or protects against a loss in declining markets.

Past performance is no guarantee of future results. Index performance does not reflect the deduction of any investment-related fees and expenses. It is not possible to invest directly in an index.

The S&P 500 Index is a free-float market capitalization index of 500 large publicly held U.S.-based companies, capturing 80 percent coverage of U.S. equities. It is often used as a proxy for the American stock market.

The MSCI Emerging Markets GR Index is a free float-adjusted market capitalization index that is designed to measure equity performance in the global emerging markets.

The Russell 2000 TR Index measures the performance of the smallest 2,000 companies in the Russell 3000 Index and serves as a benchmark for U.S. small cap stocks.

Quotes/Excerpts from: “A Charlie Brown Christmas.” Dir. Bill Melendez. Lee Mendelson Films, 1965. Animated Film.

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