Famous miser Ebenezer Scrooge was introduced to readers in Dickens’ 1834 classic tale of redemption that takes place on Christmas Eve. Scrooge has lived a life focused on growing his financial wealth with little regard for life outside his counting house. In one remarkable evening, on a Christmas Eve seven years after the death of his partner Jacob Marley, he is visited by Marley’s Ghost and three other Spirits. Their visits offer Scrooge an opportunity to objectively look at himself and others from an abstract point of view, and revisit his past actions and beliefs. The now-famous result is well known, but we might ask, how does this apply to investors?
Seven years ago this very day, in the throes of the Financial Crisis, here’s where the markets sat compared to where they are today:
The global economy in 2008 was mired in slumping markets, broken banking systems, panic selling in every market segment and plagued with a lack of financial controls. More pain and dislocation in the job and securities markets were waiting for investors in 2009 and beyond. It was a very difficult period to navigate, from both an emotional and analytical perspective.
Now let’s fast forward to 2015. Many investors are disappointed by market returns this year. There are no global tailwinds at play (other than low oil prices), and different regions and countries are executing different monetary and fiscal policies. We are truly in a state of global flux. But we also think that as U.S. investors take stock of the year, there is certainly more to be thankful for in 2015 than during the Crisis. We don’t mean to imply that everything related to the U.S. markets and economy has been rosy during the recovery, but the U.S. is certainly in a better place than many other areas of the world. We can also confidently predict that we don’t know what will happen next year or the year after, but at this writing, we expect continued modest recovery in global growth and in modest returns for stocks and bonds.
We can also use Dickens’ three ‘spirits’ to help set our behavior and our expectations going forward:
PAST
- DON’T focus on GREED (at any price) and FEAR (panic selling) due to lack of planning
- DO focus on long-term results that are right for you, NOT the short term noise
PRESENT
- DON’T tinker and chase returns based on “feelings” and avoid short term opportunism
- DO be aware and rebalance to your correct allocation as your plan calls for
FUTURE
- DON’T ignore the lessons of the past and what the real data says
- DO focus on what can be controlled – allocations, investments and EMOTIONS
Scrooge’s transformation occurred on many levels; most of us have a lot to be thankful for, too, and we hope that Dickens’ message of charity and forbearance resonates at this time of year.
We offer best wishes for a peaceful and grateful holiday, and a Happy New Year!
