Decade in Review
The bulls take the teenies. Gains across US markets over the past ten years have presaged a 15% average annual growth rate, massively outsizing the average 10% return made by investors over the past 90 years. Low interest rates starved savers and bashed bond buyers, but anyone willing to traverse unthinkable risks in the equity world saw significant gains. Let’s replay this rollercoaster of a decade, frame by frame!
2019
S&P 500 return: 18.5%
Best sector: Tech
Worst sector: Health care
Key event: Fed loosening.
After markets made a spirited January fightback from the brink, 2019 turned into a second attempt at 2018. The trade war continued to escalate, but stocks continued to climb. This time, no pull-back. These were truly happy days to be an investor!
Federal Reserve Chair Jerome Powell had his name up in lights during the year, controversially lowering interest rates to stimulate more business activity after the yield curve inverted. Deep into the longest American bull run in history, armageddonists say there will be no easy money left to give out when stocks need resurrecting in the next crash. Time will tell!
The rest of the dramas came sector-by-sector. Tesla and Netflix met their matches in auto-making and streaming, respectively. FAANG powered on in spite of antitrust efforts on Capitol Hill to break up Big Tech, and biotech bounced higher on buyouts. In any case, most of us got richer. There’s no time like the present, right?
2018
S&P 500 return: -4.4%
Best sector: Health care
Worst sector: Energy
Key event: Trade war escalation.
So, what went wrong in 2018? After Trump delivered on his $80 billion trade war promises and stocks wobbled with China’s tit-for-tariff counterattacks, geopolitical hostility culminated in an epic market sell-off in the final quarter. We almost dipped into recession territory!
Before then, alleged Russian election interference was in the news. Facebook was put on trial by investors on counts of privacy violations and hosting fake news, and billions were wiped off its market value. Investors’ favorite FAANG clan turned into the ‘AANG’ clan.
A Kardashian tweet also sunk shares in Snap, and KFC ran out of chicken to top things off. Fortunately, Elon Musk’s electric revolution with Tesla gathered steam(!) through the year, so some investors still found pockets of alpha.
2017
S&P 500 return: 19%
Best sector: Tech
Worst sector: Telecoms
Key event: Article 50 triggered.
An upturn in oil, three rate hikes, and a sinking US dollar were up against sweeping corporate tax reforms, courtesy of newly inaugurated President Trump. Tax reforms came out on top, but stocks weren’t the shrewdest “investment,” even as they posted positive returns every month (that was virtual currencies instead!).
Hype grew through the year as hundreds of rogue cryptocurrencies went Rambo. Ttraders’ excitement culminated in the chart for Bitcoin, going almost vertical in December. It hit $20,000 but has since fallen to around $3,000.
Otherwise, the biggest stories this year were continuations of last year’s news. Brexit fallout intensified as Article 50 was triggered, and the White House threatened to wage a trade war against China. That gave geopolitical pundits plenty to mull over, but cyclical stocks weathered it well. The Nasdaq’s Big Tech FAANG stocks really found their mojo!
2016
S&P 500 return: 12%
Best sector: Energy
Worst sector: Health care
Key event: Trump wins the Presidency-elect.
Even on election night itself in Washington, Trump’s erratic anti-free trade deal agenda had economists convinced that a shock victory would crash markets. In what was a shock to the shock to the shock, not only did he win, and not only did the S&P 500 tick higher the following morning, but a sustained “Trump Rally” ensued. We should have known. As a businessman stacking his transition team with Wall Street insiders, he won the love of markets very quickly.
Brexit, however, did little to raise markets. The pound cratered within seconds of EU-sceptics “taking back control,” and financial services took the brunt of damage to the country’s FTSE 100 stock exchange. Investors thinking “we’ll wait this out” may not be too pleased with how history has unfolded since that infamous June 26th!
2015
S&P 500 return: 1.4%
Best sector: Consumer Discretionary
Worst sector: Energy
Key event: The Great Fall of China.
After another red hot start to the year with billions flowing through mergers and acquisitions, events in June wiped the smiles off investors’ faces. All of a sudden, China’s flagship Shanghai Composite index started shedding value. The world’s second-largest economy devalued its currency and pulled global markets under. If it wasn’t for State-side merger mania, the patchy story of 2015 could have been much worse for US investors.
In other news, Volkswagen blotted its copybook by lying about emissions, and favoring some, oil prices continued to fall. Greece signed up to a third bailout plan, and some guy named Donald Trump decided to try running for President. But he could never win, right?
2014
S&P 500 return: 13.7%
Best sector: Real Estate
Worst sector: Energy
Key event: Invstr Launched!
The Invstr app was launched in 2014! We know, we know – we look good for our age.
From the get-go of this year, market records were immediately smashed by bulls propelled forward by the previous year’s gains. 67 out of 67 polled economists predicted US interest rate hikes. None came.
As the cost of borrowing fell, US Brent Crude oil drillers accelerated production of the liquid gold. Demand from China and Europe failed to soak it all up, so most investors banked on OPEC to step in and ease off on supply (y’know, its job?). Alas, they kept drilling, and oil prices fell off a cliff.
2014 spat conventional wisdom back in conventional money managers’ faces. Just five stocks – Berkshire Hathaway, Johnson & Johnson, Apple, Microsoft, and Intel – carried the markets, creating a movement to boycott thousands of underperforming hedge funds that weren’t heavy on those names. The price of oil crashed from $100 a barrel to $60 a barrel, but the US economy saw another healthy year on the whole. Gross domestic product (GDP) grew, unemployment shrank, and the dollar strengthened as the world’s reserve currency.
2013
S&P 500 return: 32.4%
Best sector: Consumer Discretionary
Worst sector: Real Estate
Key event: Boston Bombings
The premiere of Martin Scorsese’s ‘Wolf of Wall Street’ couldn’t have been better timed, hitting screens during the most lucrative year not only of the decade but since 1997! Provided you stuck to developed economies, went bond-light, and steered clear of gold, not even predictable Federal Reserve tightening talk could dampen your spirits.
As the Eurozone crisis abated, stock markets the world over came back online. The S&P 500’s best performer was Netflix, while the “retail apocalypse” wiped out many Western brick-and-mortar high street brands.
2012
S&P 500 return: 16%
Best sector: Financials
Worst sector: Utilities
Key event: Facebook IPO!
This year was marked by the rise and fall of Apple shares and Facebook’s overhyped initial public offering (IPO). Millions lost millions in a chaotic first day of trading for Zuckerberg’s social media giant, but how about $38 for a slice of Facebook, instead of $200 plus today?
Things would get worse before they got better for the Eurozone, but new Central Bank chief Mario Draghi’s bailout plan did eventually lift markets, as did re-elected Obama’s Senate agreement to save a debt crisis, and China regaining (some) fiscal control. A couple billion in rogue losses from JP Morgan’s “London Whale” put bullish sentiment on hold until the very last minute, but all-in-all, not a bad year!
2011
S&P 500 return: 2.1%
Best sector: Utilities
Worst sector: Financials
Key event: Eurozone crisis.
Global markets tried to tip-toe through 2011 with the help of gold as a safe haven from political upheavals, but everything came to the boil in August. State-side, the mourning of Steve Jobs was interrupted by credit rating agency Standard & Poor’s downgrading America’s “zero-risk” government bonds. Facing a surge in oil prices already thanks to a Libyan revolution, the floor gave way underneath stock markets.
Around the same time, the Eurozone crisis peaked. Heavily indebted countries like Greece and Italy put the euro in a death spiral before major economies like France and Germany bailed them out. However, a look today at the USD/EUR currency pair confirms bearish investors’ worst fears of the time, a “new normal.”
Asia didn’t escape the drama; Japan’s NIKKEI fell victim to the country’s huge tsunami, and China’s markets crashed too. On a positive note, the 10-year manhunt for Bin Laden ended!
2010
S&P 500 return: 5.5%
Best sector: Real Estate
Worst sector: Health care
Key event: Flash Crash!
Following the collapse of the housing market and subsequent financial depression of 2008 and 2009, investors reared their heads in 2010 to pick up the pieces. After the shock, denial, pain, and guilt wore off, the blame game started. President Obama went after Wall Street while everyone else looked around for something riskier to cling to than gold.
Choosing stocks would test your heart. In May, the ‘Crash of 2:45’ saw US markets plunge 9% in 36 minutes! There was a swift recovery, but the phenomenon remains unexplained to this day. Weird, right? Probably just someone’s fat-finger…
Oil giant BP accidentally released 210,000 gallons of oil into the Gulf of Mexico to round the year off. Ouch. And Prime Minister Gordon Brown also fell victim to the credit crunch. His Labour party hasn’t returned to power in Britain ever since.
And Beyond…
Interest rates remain as low-slung today as in 2010, after being panic-dropped to combat the worst financial crisis since 1929. Boy did the stimulus work! But can it keep working? As investors, we can learn from the past to help us prophesize the future. Let us know your key takeaways from all this!
