In the 1950s psychologist Solomon Asch conducted a series of experiments to investigate the extent to which social pressure from a majority group could affect a person to conform. Asch’s experiments were simple vision tests. A group of eight male college students were placed in a room, shown a card with a line segment on it, and then shown another card with three line segments labelled A, B, and C. One of the line segments on the second card was the same length as the line segment on the first card, while the other two line segments were clearly of a different length. Participants were asked to write down their answers and then give their answers aloud. Seems like a pretty straight forward experiment, but there was a twist.
Over the past 80 days, the US stock market has declined about 11%, and over the last 365 days, it is down about 1%. Foreign stock markets have declined about 9% over the last 80 days and are down about 10% for the last 365 days as well. The US bond market, typically a good hedge to the risk of stocks, hasn’t delivered much protection during the same time periods, being up about 1% in the last 80 days and down about 1% for the last 365 days.
Prior to the passing of the Tax Cut and Jobs Act (TCJA) in December of 2017 you likely enjoyed the tax deduction that came with your charitable contributions – no matter the size of the donation. If you lived in a state where you paid state income taxes and had high property taxes you were probably itemizing your deductions (See NJ, NY, CT, and MA – just to name a few).
Earlier this month I had the opportunity to attend the 29th annual SRI Conference in Colorado Springs, Colorado. The SRI Conference is the premier annual gathering of sustainable, responsible, and impact investment professionals working to direct the flow of investment capital toward a truly sustainable future.
Over the past few weeks the focus of our weekly posts has been on the volatility in the global equity market. We have sought to provide some insight into what’s driving global stocks lower and provide perspective on how frequently drawdowns like the one we are currently mired in occur. We hope these insights and perspectives have been valuable for you and helped to give you peace of mind.
It goes without saying, this has been a challenging year for investors. Every asset class has experienced significant loss at one point or another – International Equities, US Bonds, and recently, US Equities. As much as we say uncertainty and risk of loss is the cost of realizing long-term capital returns, times like this can make even the most rational long-term investor fear the future.
After a long stretch of relatively calm and steady stock market gains, volatility has reared its ugly head over the past four weeks. Last week we detailed how interest rates have contributed to the recent stock market slump. While interest rates may be the driving force behind the quick and dramatic drop in stock prices, there are other factors at play. Trade tensions between the U.S. and its global trade partners are running high. There is uncertainty around the upcoming midterm elections. There is nervousness as companies are beginning to announce third quarter earnings. Housing sales are starting to slow. Geopolitical pressures are mounting in light of the murder of Jamal Khashoggi in Saudi Arabia. All of these issues have played a role in the recent market volatility that has seen the S&P 500 decline in 15 of the 19 trading days in October.
Last year, there were eight trading days where the S&P 500 moved up or down by at least one percent. So far this year, there have been forty-one such trading days. Further, five of the last eight trading sessions have seen the S&P 500 move up or down by at least one percent. With the recent volatility in the stock market has some asking what’s next for the stock market and the U.S. economy.
Last Wednesday, October 10th, U.S. stocks suffered their worst losses in eight months. The Dow Jones Industrial Average declined 3.2% and the S&P 500 declined 3.3%, both notching their worst losses since February 8th. The S&P 500 also posted its first six-day losing streak since November 2016, although a bounce back on Friday stopped that slide.
At HIGHLAND, we continue to support the efforts by our staff to develop personally and professionally. We have a commitment to providing excellent service and guidance to clients. Each member of our team has an intellectual curiosity and belief that what they do really matters to our clients’ lives. With this in mind, we have some exciting news to share about the HIGHLAND team.
This past quarter was filled with notable events and anniversaries. At the market’s close on August 22nd, the S&P 500 bull market became the longest ever. The S&P 500 managed to avoid a decline of 20% or more on a closing basis for 3,453 calendar days, a streak that began in March 2009 following the Great Recession. This current bull market surpassed the previous longest bull market that lasted from 1990 to 2000. Since that point, the S&P 500 has continued to reach new all-time highs. It’s ironic that we celebrated the longest running bull market nearly10-years removed from the collapse of Lehman Brothers on September 15, 2008 that shook the financial markets and preceded the Global Financial Crisis. It may feel like a lifetime ago, but we are not far removed from that historic event.
Over the recent past, more individuals have been taking advantage of Health Savings Accounts (HSAs) offered in tandem with high deductible health plans (HDHPs). It is estimated that deposits into HSAs will increase by 22% to $53.2 billion from 2017 to 2018 with direct employer relationships being the leading driver of new account growth.