The Energizer Bunny is the marketing icon and mascot of Energizer brand batteries in North America. It is a pink mechanical toy rabbit wearing sunglasses and blue and black striped flip-flops that beats a bass drum bearing the Energizer logo. The Energizer Bunny advertising tagline is brilliant, “Keeps going and going…” When used as a synonym to describe a person or other object, it means a person who seems to have limitless energy and endurance. Is it appropriate to characterize the stock market rally since March 23 as being like the Energizer Bunny? It appears everything is breaking out. Market strategists indicate this is the broadest rally, both domestic and geographically, since 2013. 93% of the stocks making up the S&P500 are above their 200-day moving average (trend line of the last 200 days). That’s a top decile reading historically. The high reading suggests the market is overbought (high enthusiasm; more on this below), but in fact bodes well for 12-month forward returns being positive. The current market rally “keeps going and going…”
“Life in Perspective: Identifying Your Investment Focus” – November Commentary
Many are asking, “what’s next?” given election stress is ending. Let’s start with a true story.
Kati Metro, 74, was hiking near Phoenix, Arizona when she fell, injuring her face, wrist, and hip. Rescue workers arrived by helicopter, and strapped her to a stretcher. Unfortunately, fierce winds caused one of the lines – intended to stabilize the stretcher and prevent spinning during its lift into the helicopter – to fail. As the horizontal stretcher was pulled upward, it started spinning faster and faster, like the runaway hands of a clock – over 170 rotations during the two minute ascent. Katie survived the ordeal, although she was dizzy for days. As horrifying as the experience was, it’s a bit of an analogy about how a lot of people feel right now. Seeing clearly with “20/20” vision is challenging this year. Too many big and noisy developments continue to alter most everything about daily life; we are fatigued by this yearlong dizzying experience. Identifying your focus is important, particularly in the world of investing.
“Forward Expectations & UNCH” – Nvest Nsights Q3 Newsletter
Investment growth was furiously positive in the six months following the March lows, besting even the same interval of time following the “Great Financial Crisis” of 2008. In “Forward Expectations“, we review that while history shows the forward return pace typically slows, performance remains positive – particularly when looking +6, +12, or +24 months forward. While September reminded investors that challenges in reopening the economy persist amid covid-19, it is also good to recall that the 4th quarter is often the strongest performance season for stocks. That pattern includes election years. Should historical data not be convincing enough, we explain in “UNCH” how fundamentally significant are the “all-in” efforts of governments around the globe to support their economies. One chart monitoring change in Money Supply “may be all one needs to know” over the next few years. We should assume that uncertainty on many fronts will persist; and uncertainty results in volatility. But “Fear of Volatility” reminds investors not to confuse volatility with risk of loss (they are very different); those who do are more prone to make permanently impactful errors when investing.
Also, if interested: The Higher Wages of Growth, provides a review economic stats recently published by the US Census Bureau.
A printer-friendly version of our quarterly newsletter can be obtained here: Q3 Nvest Nsights
Don’t Surrender to Cash
“Forced Perspective” is a technique employing optical illusions to make objects appear closer/farther, or bigger/smaller than they actually are. Filmmakers would for example place a miniature dinosaur close to the camera so that it would look gigantic in the film. Similarly, many tourists at the Leaning Tower of Pisa take a “selfie” with their smartphone camera, making it appear as though they are preventing the structure from toppling. Reflecting on years of experience it is hard to recall a time where it felt like there was more uncertainty than the present. A global pandemic, social unrest, and a polarizing US presidential contest are presently being placed very close to the “camera” by media, creating HUGE worry – a forced perspective. We cannot recall a time where there were not several big worries simultaneously distracting investors. The chart below provides just some past examples.
The Higher Wages of Growth – Review of Recent Economic Stats
In case you missed it as most of the media did, the Wall Street Journal (September 17, 2020) published an article by this title. In essence – “Rising economic growth lifted all classes.” The US Census Bureau reported some interesting personal income statistics:
“Humor Lightens the Load” – September Commentary
Our last monthly commentary “Weird Words About a New Abnormal” attempted to update about the markets and a frequent question on investor’s minds – “After the significant financial market rebound, should I consider becoming more conservative (for various reasons)?” The weird words were entertaining and appropriate for a heavy topical discussion. Let’s take a cute (humorous) route this month. Let’s lighten the load with some humor while discussing the current market action and outlook. The biggest difference in people who demonstrate resilience and those who don’t is their perception – how they conceptualize traumatic or stressful life situations. It’s all the little things that happen in your day-to-day life; how do you perceive them? One way to change bad feelings is via good doses of humor.
“Weird Words About a New Abnormal” – August Commentary
Do you feel a little discombobulated by strange words? If someone is talking lots of gibberish, gobbledygook, and poppycock, they may be trying to discombobulate (verb) you. If you are very discombobulated (adjective), you are also flummoxed. Confused? That’s what these two words mean – “confuse” (19th century words).
Amazingly – time is flying; it is already more than 4 months since a large share of the global economy was mandated to a near-subsistence crawl. While there is evidence of emerging green shoots that suggest the trough levels are past, the persistence of COVID-19 with its related behavioral accommodations dampens reopening the economy and makes for an abnormal jagged experience.
“65 Days… Now What?” – Nvest Nsights Q2 Newsletter
As we move into the 2nd half of 2020, we are struck by how much is changed from just 6 months ago. A global health crisis/pandemic thrust the world into what is arguably the deepest and sharpest economic recession in a generation’s memory. If that were not enough, the backdrop of acute economic pain combined with several most unfortunate societal tragedies to create a degree of social unrest not felt so acutely in many years.
Despite these dynamics, the 2nd quarter provided strong recovery for global financial markets. Most attribute this almost unbelievable market rebound to a forceful fiscal and economic policy response by governments globally. In this quarter’s newsletter (below), you’ll find 3 brief articles. The first, entitled “65 Days… Now What?”, places the strength of the stock market since the March 23 low in historical context and reviews the actions we pursued early in the 2Q to position portfolios for economic recovery; “Offense Still on the Field” explains how the process of reopening the economy will remain complex amid lingering fallout from the reality of covid-19. Lastly, “True vs. True? And Truth!” examines the Great Depression era (1930’s) and the series of what are now considered consecutive policy mistakes that likely kept both the economy and financial markets impaired longer than if different actions were pursued. Studying these is relevant to the path forward.
A Focused Financial Life: New Tool to Aid Financial Fitness
1) Set financial goals; 2) Understand where your money is going; 3) Manage your debt; 4) Put your finances on autopilot; 5) Maintain a steady lifestyle; 6) Invest wisely; 7) Obtain knowledge and advice.
At Nvest, our primary goal we strive to achieve with each client is “delivering financial peace of mind.” We believe this goal is best achieved through regular communication; a prudent, time-tested approach to investment management; and via a strong and detailed understanding of how your accumulated assets form the big picture, “financing” you through each stage of your life. In these respects, we are excited to introduce and make available to clients a new tool we call the LIVING LIFE client portal.
Looking Through the Right Lens – June 2020
2020 was dubbed “the year for seeing clearly” due to the number being analogous to the description for “perfect” 20/20 vision. It’s interesting that we often use this term to describe excellent vision, yet don’t necessarily know what it means. As it turns out, 20/20 vision does not mean “perfect” vision; but according to the American Optometric Society, it simply means “seeing clearly at 20 feet what should normally be seen at that distance.” 20/20 vision means “normal” vision of an object at a distance of 20 feet. There are other important aspects to vision skills – peripheral awareness, side to side vision, eye coordination, depth perception, focusing ability and color perception – that contribute to overall vision ability.
So, how are you “seeing” your financial world today; what investment and economic outlook do you “see?”