View Firm's Library

How Rare Average Actually Is | From the Desk of John Heilner


January is when every player in the investment business seems to go on record with 2023 stock market predictions. Our only prediction about this long list of predictions is: what most people think will happen in 2023 almost certainly will not happen.

Take 2022 for instance, Goldman Sachs, even the Federal Reserve themselves, predicted there would be between four to six 0.25% interest rate increases last year. Twelve months later, we have effectively had 17! If our weather app were that wrong that often, we would simply delete it and find another app.

Many times, when sitting with a new client, advisors cite the "fact" that the stock market, as measured by the S&P 500, has historically returned about 10%-11% annually. While that statement about historical performance is accurate, it can establish an incorrect expectation. You see, historically, the S&P has rarely seen a 10% annual return in any given year. In fact, anything even close to a 10% return is the outlier. Over a lifetime of investing, that long-term 10%-11% return will be made up of many years way above or well below that average.

As Ben Carlson explains in his "A Wealth of Common Sense" blog,

"Going back to 1928 there has been only ONE single year of returns that approached 10% (1993 when the S&P 500 was up 9.97% in total on the year).

Most of the time the stock market is up big or down big on the year. From 1928-2022, 70% of all years have seen double-digit gains or losses (including 2022):




 The history of the stock market is big gains and big losses with the occasional "boring year" thrown in for good measure. If we use history as a guide, 2023, standing alone, is more likely to see double-digit gains or losses than anything approaching the long-term average." (1)

Investing is never easy, there have been feasts, famines, wars, high and low interest rates, booms, busts, recessions and thriving economies. My clients have heard me often repeat two mantras: 1) the stock market hates uncertainty and 2) the markets over do everything.

The latter mantra is the most important to remember. When things are good, too many people try to make the case that stocks will never go down again. When things are bad, others try to make the case that stocks will never rally again. History shows that neither belief is true.

While it has been a difficult process in 2022, normalizing interest rates will benefit many investors looking for moderate returns at lower risk. Since 2009, we have been working in a yield-deprived environment, commonly referred to as TINA (There Is No Alternative), where it was essential to invest heavily in the stock market in hopes of a satisfying return.

In 2023, the acronym is now TIFAA (There Is Finally An Alternative) with the best bond yields available since before 2007. Please resolve in this new year to meet with your financial advisor to make sure your portfolio stock/bond mix is in-line with your risk tolerance and your investment objectives.

Sources
  1. Some Stuff That (Probably) Won't Happen in 2023
    A Wealth of Common Sense



WARRANTIES & DISCLAIMERS

There are no warranties implied.
Any opinions expressed on this website are the opinions of WT Wealth Management and its associates only. Material listed on this website is neither an offer to buy or sell securities nor should it be interpreted as personal financial advice. You should always seek out the advice of a qualified investment professional before deciding to invest. Investing in stocks, bonds, mutual funds and ETF’s carry certain specific risks and part or all of your account value can be lost.

At WT Wealth Management we strongly suggest having a personal financial plan in place before making any investment decisions including understanding your personal risk tolerance and having clearly outlined investment objectives.

View Disclosure
WT Wealth Management is an SEC registered investment adviser, with in excess of $100 million in assets under management (AUM) with offices in Flagstaff, Scottsdale, Sedona and Tucson, AZ along with Jackson Hole, WY and Las Vegas, NV. WT Wealth Management is a manager of Separately Managed Accounts (SMAs). With SMAs, performance can vary widely from investor to investor as each portfolio is individually constructed and managed. Asset allocation weightings are determined based on a wide array of economic and market conditions the day the funds are invested. In an SMA, each investor may own individual Exchange Traded Funds (ETFs), individual equities or mutual funds. As the manager we have the freedom and flexibility to tailor the portfolio to address an individual investor's personal risk tolerance and investment objectives – thus making the account “separate” and distinct from all others we manage. An investment with WT Wealth Management is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Any opinions expressed are the opinions of WT Wealth Management and its associates only. Information offered is neither an offer to buy or sell securities nor should it be interpreted as personal financial advice. Always seek out the advice of a qualified investment professional before deciding to invest. Investing in stocks, bonds, mutual funds and ETFs carries certain specific risks and part or all of an account's value can be lost. In addition to the normal risks associated with investing, narrowly focused investments, investments in smaller companies, sector and/or thematic ETFs and investments in single countries typically exhibit higher volatility. International, Emerging Market and Frontier Market ETFs, mutual funds and individual securities may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles or from economic or political instability that other nations experience. Individual bonds, bond mutual funds and bond ETFs will typically decrease in value as interest rates rise. A portion of a municipal bond fund's income may be subject to federal or state income taxes or the alternative minimum tax. Capital gains (short and long-term), if any, are subject to capital gains tax. Diversification and asset allocation may not protect against market risk or investment losses. At WT Wealth Management, we strongly suggest having a personal financial plan in place before making any investment decisions including understanding personal risk tolerance, having clearly outlined investment objectives and a clearly defined investment time horizon. WT Wealth Management may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. Individualized responses to persons that involve either the effecting of transactions in securities, or the rendering of personalized investment advice for compensation, will not be made without registration or exemption. WT Wealth Management's website is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of WT Wealth Management's website should not be construed by any consumer and/or prospective client as WT Wealth Management's solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the internet. Any subsequent, direct communication by WT Wealth Management with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. A copy of WT Wealth Management's current written disclosure statement discussing WT Wealth Management's registrations, business operations, services, and fees is available at the SEC's investment adviser public information website (www. adviserinfo.sec.gov) or from WT Wealth Management directly. WT Wealth Management does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to WT Wealth Management's web site or incorporated therein, and takes no responsibility therefor. All such information is provided solely for convenience purposes and all users thereof should be guided accordingly.

Contact John Today

Contact John Today

Reach John directly at 480-589-7522
or by using the contact form below.

Your message has been sent. Thank you!
Cancel