Approaching Christmas on a High Note
December is upon us and with Christmas approaching, many are thinking about Christmas celebrations, catching up with friends and family, and holidays to the beach. Another reason to cheer is that if we look back over 2019 global economies have continued to expand, businesses have continued to grow, and global share markets have risen over 20%, well above the average historical yearly return of around 10%. However, far from being unusual, a yearly performance of 20% or greater has occurred one third of the time.
The illustration below shows the US share market’s annual performance going back to 1871. Dividing the years up by performance shows how often 20%+ returns happen! Interestingly while the average performance since 1871 is 10% only two years (1899 & 1993) have actually had a return of 10%!
As we think about the 2019 year in review, there has been a lot of news about trade uncertainty, geopolitical concerns, and slowing economic growth. Despite all of these things, the global economy still looks likely to have expanded in 2019 by US$3 trillion to an estimated US$88 trillion. This growth in the world economy continues to be supported by trade, consumer spending and company earnings.
Following last year’s modest decline, this year’s strong gains are a good illustration of the value in ‘staying the course’ during the occasional periods of shorter-term weakness that come with long-term investing. While performance in 2020 may be above or below the long-term averages, the broad economy is likely to continue to support markets growing over the long term. In this light, the Christmas break is always a good time to reflect, and an opportunity think about your long-term financial objectives. This is something your financial adviser is well placed to help with - having a plan written down will leave you assured that you are on track to meet your goals.
Disclaimer: This article has been prepared for the purpose of providing general information, without taking into consideration any particular investor’s objectives, financial situation or needs. Any opinions contained in it are held as at the report date and are subject to change without notice.
You’re sitting in your favourite restaurant, feeling famished. The waiter arrives and reads out a long list of mouth-watering specials. Yet the moment he walks away, you find you can recall only the last item on the list. Congratulations, you’ve been struck by the recency effect.
One of the most persistent debates in the investment industry is whether investors are better to use passive or active managed funds. With strong advocates on both sides of this debate, it may seem like an obscure discussion. However, for investors, long-term performance data tells a conspicuous story.