“Can’t Anybody Here Play This Game?”

by Morgan Stone | Mar 19, 2018


Baseball manager Casey Stengel once asked this question of the 1962 Mets, as he was fed up with the team’s ineptitude.  It can equally be applied to the annual tradition of highly touted stock market and economic predictions promulgated by the financial media.

In January, publications like Barrons, Money Magazine and Motley Fool paraded out their annual list of stocks to buy and sell, and predicted how the stock market will fare.  You may have a pile of those January issues laying on your coffee table right now.  The best thing to do with all those predictions is have a good laugh at the end of the year when tallying how far off base some of them were.  But as Warren Buffet once said, “the job of financial magazines is to sell magazines.”

True to form, in their 2017 predictions, many economists had projected lackluster or even negative returns for the US stock markets, and had downplayed even further the prospects for foreign markets.  And yet, 2017 produced solid returns in almost every asset class, especially in non-US markets and emerging markets! 

Can the Market be Predicted?  Yes and No….

Since 1980, the S&P 500 has only had 7 years of negative calendar year returns. Keep in mind that two of those down years were only negligible losses of 1% (2015) and 2% (1994).

However, during these 38 years, the average intra-year drop was almost 14%.  In other words, during any given year, an investor must accept and EXPECT volatility and market swings as part of the investment experience.

Reviewing these past 38 years, the S&P 500 produced positive and often substantial calendar year returns 82% of the time.  Will this trend continue over the next 38 years?  I will tell you in 39 years!  However, an investment that has a track record of producing positive returns 82% of the time deserves serious attention.

What should investors do?

After almost 25 years in this business, I have concluded that most successful investors embrace a long term perspective, remain invested and diversified (even during down market cycles) and rebalance their portfolios in a disciplined and systematic manner.

History has shown that in most up years, stock market returns are often produced on just a few key days of large gains.  If you happen to be out of the market those days, you are likely to miss out on the strong returns that year.

More importantly, successful investors focus on planning and meeting life planning goals, rather than trying to time the market or pick the winning stocks.  Successful investors also address issues that could derail their financial security.  Are they saving enough for retirement or college tuition?  How do they protect their family, if something happens to them? Are they minimizing taxes?  These are the financial planning concepts that make the real year over year difference. 

Please contact Morgan Stone or Kacie Swartz if you would like to learn more at 512-469-9152 or info@stoneasset.com