2016 Market Review
As we head into 2017, I wanted to share with you the following overview of what happened in the Markets in 2016. While it's nice to be reminded of market performance in a year where most major markets had positive returns, it's helpful to consider the charts in this Review that document major news items against the performance of the markets during the year. As always, headlines shouldn't be viewed as determinants of a market's direction but rather as examples of events that may have tested investor disclipline during the year.
2016 Market Review
2017 and beyond
I want to share a quick anecdote from 2016 to keep in mind for heading into 2017 (and beyond). Last year, I attended a Dimensional Funds conference and the speaker at one of the sessions began by asking us "What do you think the S&P 500's return will be this year?". The attendees were all financial advisors and we answered 8%, 9%, or 10%, which is what you'd expect, as this is the approximate range of average long-term annual returns of this index. Interestingly, since 1926, the annual return of the S&P 500 has never actually ended up between 8% - 10% in a given calendar year! So while we all "expect" equity returns to be in this range, it doesn't typically occur!
If equity returns aren't actually 8% - 10% in a given year, they're either lower than 8% or higher than 10%. Which means you need to be discliplined as an investor to ride out the years with low returns in order to get to the years with the higher returns. No one knows what future returns will be. But history can be instructive at informing what our behavior should be as investors to have a successful investment experience. As we've stressed, this behavior should be to maintain a diversified investment portfolio that takes the appropriate amount of risk you're comfortable with to achieve your long-term goals. And to rebalance that portfolio periodically when it gets out of alignment with its benchmark.
We hope all is well with you and your family, and we wish you all the best for a healthy and prosperous 2017. We're ready for Tax Season and we look forward to preparing your tax returns shortly!
“Highly qualified staff”
“A trusted relationship, not just a client relationship”
“Jarod and the team take a personal interest in us as clients”
“Their tax knowledge and depth is impressive”