Here we are once more at the starting point of a fresh new year. We always begin with so much optimism… hoping and dreaming that this will be an awesome year. Many of us have set our New Year’s resolutions, and by golly, we’re going to keep them this year! Whether it’s to diet, exercise, travel, save more, or spend less, it takes attention to detail and willingness to commit to accomplish these goals. But the stock market is one area an investor can’t control… but we can control how we react to it by planning around the volatility.
This brings me back to January 2017. It was a pivotal year in American history when President Trump took office. Many investors were concerned about how this brash president would affect the stock market. But once government regulations were cut, corporate taxes reduced, and repatriation of 1/3 of U.S. corporate dollars returned to the U.S., the stock market rose. The S&P 500 headed straight up for the entire year resulting in a 22% rate-of-return.
The average annualized total return for the S&P 500 Index over the past 90 years was 9.8%.
It’s difficult to forecast what will happen in 2019. The economy is strong and Gross Domestic Product (sale of goods and services in the U.S.) is growing at a rate of almost 3% (2-3% growth is ideal). Unemployment is the lowest in nearly half a century and wages are beginning to rise. All of this is good, but the economy and stock market aren’t always in lock step of each other.
The point is that it’s very difficult to time the stock market. History tells us that it’s “time in the market” that counts. Investing for short periods makes it likely you’ll have short term losses. Instead stick to your long-term plan. As long as you have adequate cash reserves and a diversified portfolio based on your individual risk level, you can weather a storm.
S&P 500 Annual Total Return Historical Data
December 31, 2018: -4.38%
December 31, 2017: 21.83%
December 31, 2016: 11.96%
December 31, 2015: 1.38%