As I look back on the just-concluded decade of the 2010s, I’m reminded of the Ukrainian-American stand-up comedian Yakov Smirnoff. If you remember the 1980s, you may remember him. His comic persona was of a naïve immigrant from the Soviet Union and the catch phrase he regularly used to express his delight about America was “What a country!”
We have just closed out the 2010s and I would like to express similar wonder and delight by saying “What a decade!” It was a richly rewarding decade for investors, but if you were overly cautious in the wake of the Great Financial Crisis (December 2007 – June 2009), you most likely missed out on the biggest gains. The decade began just six months after a year-and-a-half recession and nine months after the S&P 500 bottomed out after logging a 57 percent loss. Most of us were shell-shocked heading into the new decade, and few anticipated the remarkable technological renaissance and economic recovery that followed.
How did our lives change during the 2010s? Here, from my perspective, are some of the highlights.
- Smartphones became cheap enough to become commonplace. Many of us gained access to a hand-held computer with access to the world through the internet. By 2013, 50 percent of adult Americans were using smartphones.
- Netflix began streaming entertainment content primarily through the internet instead of through its DVD mail subscription service.
- Other entertainment content streaming services (such as Hulu, Amazon Prime, and now Disney) quickly followed Netflix, and “binge watching” episodes through the internet became a “thing”.
- Engaging in social media through Facebook, Instagram, Twitter, and other social media apps (yes, on our smartphones) took center stage. Our phones could now track our “screen time” to help us understand how much time we spend on them.
- We witnessed the rise of the “selfie,” pictures of ourselves taken everywhere and anywhere to document our lives in real time.
- Traditional media – printed newspapers, magazines and broadcast TV – continued its rapid decline and was quickly replaced by the internet, subscription TV, and social media.
- Amazon fundamentally transformed the retail marketplace by providing consumers with choice, lower prices, and easy shopping experiences where the goods are delivered right to your door.
- The hotel and vacation industry were disrupted by vacation rental services (offered, of course, through smartphone apps) such as Airbnb and VRBO.
- In the same way, the taxi cab monopolies were disrupted by Uber and Lyft.
- The U.S. moved closer to energy independence due to the use of fracking technology, which unleashed large stores of oil and natural gas and made us less dependent on foreign sources of oil.
- Other technologies, such as cloud computing and 3D printing, went mainstream.
So, how did these rapid changes in the way we communicate, keep up with the news, move about, shop and, well, live each day affect the economy and markets?
- This was the first decade in U.S. history where a business expansion (June 2009 to present) and bull market (March 2009 to present) existed on the first and last day of the decade!
- The S&P 500 returned 257 percent for the decade, even through 65 market panic attacks.
- We had a decade of strong technology company success as measured by NASDAQ, which returned 343 percent.
- The economic output of the U.S. rose from $14.6 Trillion to $21.5 Trillion.
- The unemployment rate fell from 9.9 percent to 3.5 percent.
- Inflation fell from 3.6 percent to 1.8 percent.
- Companies in the S&P 500 Index grew their earnings by an average of 11.1 percent over the decade.
By any measurement, it was a period of remarkable growth. Unfortunately, not everyone participated fully in this wonderful decade. Comparing mutual fund investments from the 2000s and the 2010s, you can clearly see that more investors flocked to bond and money market funds in the 2010s than the 2000s.
Many investors, still smarting from losses experienced during the Great Financial Crisis of 2007-2009, entered the 2010s in a defensive crouch and remained overly bearish and cautious even as the rally ensued. As a result, they left some investment returns on the table. In my mind, this is evidence of why having a financial plan, a financial coach, and a disciplined investment strategy are so important. By keeping us focused on the big picture, a financial plan and investment strategy that are aligned with our goals and risk comfort level reduce the likelihood that we will react emotionally to inevitable periods of economic and market instability and give us a template for making sound financial decisions in any environment. And working closely with an engaged financial coach provides us with a sounding board and reassuring voice of reason during those critical periods of turbulence when it can be tempting to deviate from our plan. Successful long-term investing is, in the vast majority of cases, the result of adhering to a disciplined approach.
The information in this report was prepared by John Weitzer, Chief Investment Officer of First Command. Opinions represent First Command’s opinion as of the date of this report and are for general informational purposes only and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally. First Command does not undertake to advise you of any change in its opinions or the information contained in this report. This report is not intended to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. Should you require investment advice, please consult with your financial advisor. Risk is inherent in the market. Past performance does not guarantee future results. Your investment may be worth more or less than its original cost. Your investment returns will be affected by investment expenses, fees, taxes and other costs.
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All estimates provided are for informational purposes only and should not be relied on to make investment or other decisions. Should you require investment advice, please consult with your financial advisor. Risk is inherent in the market. Past performance does not guarantee future results. Your investment may be worth more or less than its original cost. Your investment returns will be affected by investment expenses, fees, taxes and other costs.
The S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. This world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 Index focuses on the large-cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. An investor cannot invest directly in an index.
- His real name was Dr. Yakov Naumovich Pokhis.
- U.S. economic output contracted by roughly 4%. Guide to the Markets, J.P. Morgan Asset Management, p. 17 (12/31/2019).
- 2010’s Recap, Part 1: Dancin’ Till the World Ends, Vulture (12/18/2019).
- For those of you with sons and daughters in high school or college, you know of what I speak.
- Bloomberg (2020) and Yardeni Research, Inc. (2020).
- FRED Economic Research of The Reserve Bank of St. Louis (2020).
- Bloomberg (2020).
- US Mutual Funds & Liquid Funds by Yardeni Research, Inc. (January 24, 2020).