There are things in life that absolutely blow my mind. One of which is just how much being a father changed my life, but there are other things like:
- It’s impossible to hum while holding your nose
- If you put your finger in your ear and scratch, it sounds like PacMan
- There are more ways to shuffle a deck of cards than there are atoms on Earth
- Vending machines are twice as likely to kill you as a shark is.
- The possibility of dying on your way to buy a lottery ticket is higher than the possibility of winning the lottery.
- How big of an economic anomaly WW2 was – via Ben Carlson
There is one fact however that, if I sit and ponder it, seems like it was an incredible long shot. Unless they dramatically revise Q3 2019 GDP lower (it would have to go from 1.9% to negative numbers AND Q4 2019 would also have to be negative) this will be the first decade in United States history without a recession. If I just jinxed it then so be it, I’ll be content with the fact that I’m the most powerful force in economic history, but I doubt I did. Isn’t that crazy? Does that not seem extraordinary to you knowing where we just came from? 2008-2009 was one of the harshest economic periods for our nation ever yet as we sit on the eve of a fresh decade it spawned not only the longest expansion in history but also a 10-year bull market.
Here is the S&P500 since the end of WW2 (using my new favorite service YCharts). There are 10, count ‘em 10 recessions on that chart. Good Times Bad Times as my friends from Led Zeppelin would say.
The biggest worry over the past year or so was that a recession was imminent. A Trade War hit business confidence, the industrial sector slowed, the S&P500 not only fell 20% but essentially went nowhere for over a year, the Fed was hiking, and earnings were slowing. In fact as of Nov 15, 2019 the Atlanta GDP Now estimate is only 0.3% so the slowdown is real. Strategist have been coming out of the woodwork lowering their equity weights and calling for the end of the expansion, the curtain felt like it was falling.
Yet a recession didn’t happen. Why? Because of you (ignore people who say this is all Fed driven) and our technologically advanced, service-based economy. The resiliency of the US Consumer has kept us growing these past 10 years. Everyday Americans and their consumption are not only 70% of the US economy but 20% of the entire planet’s economy and they’ve forged ahead. Now look, that doesn’t mean this current economic slowdown won’t eventually end in a recession. If there’s one thing I’m sure of it’s that there WILL BE another recession in the US one day but that doesn’t change the fact that we didn’t have one this past decade, the first time in our nation’s history.
So, what was the goal of this piece, other than to get you to stick your finger in your ear to see if I was right? First, it’s to remind you that no one knows what the future holds. No one. If you fell prey to pessimism, doubt, or political noise in the past 10 years you potentially missed out on an incredible run. Bad times, like recessions, don’t last forever, and good times DWARF the bad times (credit First Trust). Second, more people wake up every day trying to make the world better than worse, especially in this great nation. That is super hard to bet against. Finally, it’s to remind you that as wealth managers and stewards of our client’s capital, we help keep them on track so they can benefit from decades like these. If we don’t know where the economy or the market is going then the most important thing is how we act in them for that will determine your level of success. Focus on what you can control, ignore the noise, reap the rewards of patience.
What does the next decade hold? I don’t know, but I’m excited to find out and will enter it with optimism about the future as my default setting.