January 2, 2014
We barely missed careening off the "Fiscal Cliff," endured a 16-day government shutdown, saw mortgage rates rise over 25%, and watched as the rollout of President Obama's Affordable Care Act was badly bungled. 2013 should have been a year of doom and gloom - only it wasn't.
In a piece written during the financial crisis of 2008, Warren Buffett shared the words, "be fearful when others are greedy, and be greedy when others are fearful." With respect to 2013, he was right. Over the past 12 months, the S&P 500 rose 29.6%. Perhaps even more impressive was the 52 record closing levels for the Dow Jones Industrial Average - an average of once per week!
Now that a new year has started, and with markets at record levels, another crash must be coming, correct? Unfortunately, without a crystal ball, there's no way to know. Historically speaking however, it's not quite the doom and gloom you may imagine. Consider the following chart, showing the market performance in the years following years where the S&P returned over 25%.
|
Year |
S&P 500 Performance |
Following Year Performance |
|
1975 |
31.55% |
19.15% |
|
1980 |
25.77% |
-9.73% |
|
1985 |
26.33% |
14.62% |
|
1989 |
27.25% |
-6.56% |
|
1991 |
26.31% |
4.46% |
|
1995 |
34.11% |
20.26% |
|
1997 |
31.01% |
26.67% |
|
1998 |
26.67% |
19.53% |
|
2003 |
26.38% |
8.99% |
|
2013 |
29.6% |
??? |
Seven times out of the nine years represented, markets were positive the following year - by an average of 10.8%. Markets were indeed high at the time, and in most cases, continued to rise higher.
There's no way to know what 2014 has in store for us, we can't control the economy or financial markets. But we can control our own actions. Now is a great time to increase your 401(k) contributions, rebalance your portfolios, and to make sure that your investment strategy has your personal goals in mind. I wish you all the best in 2014, may it be full of joy, prosperity, and a healthy rate of return.
Chuck Wade, Financial Advisor
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).