With neither alarming nor invigorating market news to cover in the quarter just past, we noticed that several blogs declared 2015 a year of “meh” returns, including this New York Times post, this column, and this fellow’s personal blog. Dimensional’s fourth quarter market review did not use the actual term, but it implies as much as well, if you read between the lines.
The report also allows us to reiterate: Even in “meh” markets, it’s as important as ever to avoid chasing what may look like greener returns from any seasonal growth.
Perhaps the biggest news of the quarter was the Fed’s federal funds rate increase as described on the report’s final page. Those who believed they could react to the announcement with timely trades were more likely burned by waiting too long and missing out on the increases that already had occurred. The markets had already been anticipating the event for so long, that any conjectured “financial storm” fizzled into something more like a light, ongoing mist.
You’ll find another lesson on the perils of market timing in the summary on page 3. Underneath the arrow illustrations, take a look at the table that shares the best and worst quarterly returns since 2001. The worst quarterly returns for U.S., international and emerging stocks all occurred in Q4 2008. That’s no surprise. But when were the best quarterly returns we’ve seen since then? They were all just two quarters later, in Q2 2009. How many market-timing investors who had fled the market were able to see that one coming, and jump back in to capture them?
In his article, “Investors Had Nowhere to Run in 2015 (But That’s Okay), Brian Portnoy observed: “Appreciate that success in investing (like in life generally) is lumpy. It comes in spurts and rarely at the time that you think it will.” For this reason and many others, we continue to believe that the best way to expect your financial garden to grow is to simply be there for it, according to your own goals and risk tolerances and through all the market’s seasons.
Sage Serendipity: Last week we posted about Making Time for Creativity. Until the day he died David Bowie was a creative life force. His parting gifts were the Blackstar album with its single Lazarus released last week. His off-broadway musical Lazarus is finishing up it’s run. Not only in art but in business he was a true innovator. “I don’t know where I’m going from here but I promise it won’t be boring.”