23 Oct 2015 | By : Alder Team
Volatility is King So where do we begin? The third quarter of 2015 was undoubtedly one that we all would like to forget. In fact, we’ve fielded a lot of questions by anxious clients over the previous weeks wondering how we see the markets and the economy in the near future. Those are challenging questions to answer. Investments of all types have struggled lately and the traditional safe-haven asset classes haven’t proven to be effective either. In real terms, even cash is losing around 1.5% a year as evidenced by the fact that the Treasury has issued over a trillion dollars’ worth of one and three month Bills at an interest rate of 0%.
The depth of the quarter’s decline was very broad as the following table shows. As bad as these numbers appear, they don’t even show the worst of it. The S&P 500 was off as much as 11.4% near the end of August. The other indices were down similarly around that time. Alternative asset classes such as commodities suffered even worse losses. The Dow Jones commodity index lost 12.7% for the quarter.
In 2008, the S&P 500 lost over a third of its value. It wasn’t until sometime in 2012 that the market fully recovered. Stocks traded in 2009 at values similar to the height of the dot-com days at the end of 1999. These are long periods of time that stocks essentially had zero return. But inside of those periods, a lot of gains could actually be had. To be a successful investor, you have to be able to buy and sell when it’s right for you, as opposed to something or someone else dictating when you make those trades. Those outside forces could be anything from a margin call to needing to raise cash to pay your bills. This is one reason income is so important to investors’ total return.