One of my colleagues suggested that I write an article this week taking on the question, “What have we learned since the Great Recession?”

Great idea.

However, I think the financial press has flooded the media with similar themes this past week, “celebrating” how far markets have come since March 9, 2009. On that date, the S&P 500 bottomed out with a closing level of 676.53.

Here are a few examples of what we know from this coverage:

  • The value of the S&P 500 Index has more than quadrupled since that date in 2009, closing on Friday, March 8, 2019, at 2,743.07.
  • Over the past 10 years, the S&P 500 has an annualized total return of about 17.4%, according to Morningstar, compared to a historical average close to 10% (not adjusted for inflation).
  • According to many (and disputed by some), the broad U.S. equity market is now in its 10th year of a bull market and has set a record as the longest bull market (surpassing the 1990s’ bull last August). This is disputed by some because “bear market declines” very close to 20% have occurred twice during this bull market, according to Yardeni Research: a drawdown of 19.4% in 2011 and 19.8% in 2018.
  • The federal funds rate has been at unprecedented low levels for almost all of the bull market, undoubtedly contributing strongly to its staying power.
  • While many aspects of the economy have shown remarkable recovery since 2007–2009, overall post-recession economic growth as measured by GDP has been one of slowest on record since World War II. There were many signs last year that the trend for economic growth had improved, but many analysts believe that 2019 will fall short of 2018’s GDP growth rate.

The Congressional Budget Office said in January, “Real GDP is projected to grow by 2.3 percent in 2019—down from 3.1 percent in 2018—as the effects of the 2017 tax act on the growth of business investment wane and federal purchases, as projected under current law, decline sharply in the fourth quarter of 2019.”

So we understand these data points, and a lot more, as financial analysts have sliced and diced this bull market in every way imaginable.

I would rather reframe the question to “What do I think are some important investment lessons since the beginning of the 21st century?”


First of all, I think it is far more relevant to look back over a period that has had two full market cycles, rather than just the bull market since 2009. Second, I would not want to answer for everybody, using the presumptive “we,” since rarely can anyone agree on either history or investing!

Therefore, here is a brief sampling of what I think I have learned over the past 19 years:

  1. Directly related to the comment above, I think it does a disservice to investors to consider only one phase of a market cycle when considering a total investment portfolio or a specific investment strategy. As Jerry Wagner, president of Flexible Plan, has written in this space many times, a holistic, risk-managed portfolio approach can only truly be evaluated over full market cycles.
  2. We saw during the financial crisis of 2007–2009, as well as the dot-com meltdown of 2001–2003, that, with the advent of highly synchronized global markets and advanced trading technology, asset classes during a market crash tend to become more highly correlated. Traditional “diversification” offered little risk mitigation during those periods.
  3. Though the section above dealt with several statistics about the S&P 500, why would anyone want to use that as a personal benchmark, comparing their own investment results to an index that has suffered drawdowns of 49.1% and 56.8% just in this century?
  4. “Buy and hope,” purely passive investing is a poor alternative for most investors versus a holistic portfolio approach that includes dynamically risk-managed strategies. While it is true that markets over a long enough period have an upward, positive trajectory, strictly passive investing has its own issues, not the least of which are investor discipline and controlling one’s emotions. The real question is how can investors best achieve their personal return objectives—“goals-based” investing—given their specific financial situation, time horizon, risk appetite, and retirement planning outlook?

Please see two related articles from Proactive Advisor Magazine if you are interested in further discussion of these issues: “‘Buy and hope’ investing versus active management” and “Why goals-based investing makes sense.”

  1. Market risk is ever-present, even during what appear to be times of low volatility, investor complacency, and more tailwinds than headwinds. To paraphrase former Defense Secretary Donald Rumsfeld, “There are known knowns, known unknowns, and unknown unknowns; the ones we don’t know we don’t know.”

An article by Jerry Wagner, originally published in this column and republished in Proactive Advisor Magazine, discusses various risk considerations for investors, “What is risk really all about?”

  1. Why is all of this important? One of the most powerful concepts I have come to appreciate during the past several years is known as “sequence-of-returns” risk. For investors with a specific goal for using their assets, and a defined timeline for when those assets must be available to use, the timing of investment returns is a highly important factor. For someone saving for their kids’ college education, planning to purchase a home or second residence, or starting to fund retirement income, major portfolio losses coming at exactly the wrong time can devastate their plans and have a long-lasting impact on their financial future. For more information on this topic, please see “Why ‘timing’ is critical for investment returns.”

The bottom line? Let’s all appreciate the long-running bull market and hope it continues for quite some time. But let’s not forget the other investing lessons of the 21st century. History tells us it is not a matter of if we will ever have another bear market, but when. Perhaps more than ever, financial advisers and investors would be wise to continue to place a heavy emphasis on risk management for investment portfolios.

Market update

U.S. equities markets fell about 2% last week, posting their largest weekly losses of the year. The S&P 500 dropped 2.2%. Analysts cited concerns over global growth, heightened by pessimistic reports out of China and Europe last week. Data out of China showed its exports fell over 20% percent from the prior year, well below analyst expectations. The European Central Bank (ECB) cut growth forecasts and announced a new round of policy stimulus. On Friday, the U.S. Labor Department reported nonfarm payrolls increased by just 20,000, even as the unemployment rate fell to 3.8%.

Bespoke Investment Group also points to technical resistance for the S&P 500, saying, “We pay attention to technicals very closely, and the last week shows why they work. … 2816 is the line in the sand that dates back to the failed rallies of October and November. … The current selloff really is a purely technical one. …”

FPI Research update

Last week was challenging for equities. Our best-performing strategies last week were typically bond strategies (with some exceptions), as bonds were up for the week. Government Income Tactical was our best performer, rising 0.73%, slightly beating aggregate bonds. All-Weather Dynamic—Leveraged came in second, as gold was also up for the week, acting as a safe haven, particularly on Friday.

Some of our strategies struggled last week, though their equity exposure has been positive for the year. WP Aggressive and Evolution Plus Aggressive both fell nearly 5%, highlighting the aggressive quality of these strategies that comes with their overall higher returns in the long term.



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