Now that 2019 has come to a close, it’s appropriate to consider what we can be grateful for. This month, the market responded well to an early December employment report that showed 266,000 jobs were added to the U.S. economy in the previous month. Investors also got a reprieve when the White House announced they had come to an agreement with China on a so-called “Phase One” trade deal. This deal covers various areas, but mainly reduces some tariffs on Chinese goods, and commits China to purchase more U.S. agricultural exports. It also voided the previously scheduled tariffs on Chinese goods which were set to begin on December 15th. At the risk of sounding repetitive, stock and bond investors were rewarded for weathering the day-to-day volatility of the markets this year. The same can be said for the last decade as a whole. Starting in 2009, just a few months after the Great Recession and the worst stock market drop in 70 years, a bull market began that also rewarded those investors with the stomach to stay the course.
Yet, the last ten years favored some stocks more than others. While the U.S. stock market posted double-digit annualized returns, stock market returns in other countries achieved less. European stocks, as measured by the MSCI Europe index, for example, generated less than 6% annualized. Emerging market stocks, as represented by the MSCI EM index, annualized less than 4%. What caused such disparity between types of stocks? One important factor was the dominance of U.S. technology companies. Returns over the past ten years have been so concentrated in large U.S. technology companies that investment strategies without exposure to this trend missed the key driver of U.S. stock performance. For investors ready to rid their portfolios of all other stocks, however, history shows that a previous decade’s market leaders rarely continue such outperformance in the next. In fact, a recent study found that over the last 40 years, the largest stock in the world at the start of a year went on to underperform the global average by 9.2% during the following ten years. (Research Affiliates, 2019)
Our Deepest Gratitude
This year especially, we are full of gratitude for our clients. You met our personal loss with compassion and love. The chance to know you and work for you is something we deeply cherish. To celebrate the spirit and contributions of Bonnie Bonetti-Bell, we are honored to invite you to a Valentine’s Day Memorial Mass at The Cathedral of Christ the Light, February 14, 2 pm, 2121 Harrison Street in Oakland. A reception will follow at the cathedral. Bonnie’s family requests donations in Bonnie’s honor to Catholic Charities of the East Bay, the Oakland Symphony, Piedmont East Bay Children’s Choirs, or Rebuilding Together Oakland.