The Two Thousand Tens in Review

As we approach the end of 2019, it is not only time to consider a year in review but also look back at the last decade. We’ll focus on 2019 specifically when we get a little closer to the actual end of the year. For now, let's zoom out and take a look at some of what has happened over the last ten years. 

​The 2010s have transformed our lives for sure. In this decade the first tablet was introduced, streaming services contribute to an on-demand world, smart speakers and home automation became mainstream, and next day delivery of products are now the norm. NASA retired the space shuttle fleet while, at the same time, the space race became more of a corporate endeavor - there’s even a Tesla Roadster floating through the cosmos now. Clouds are no longer just things in the sky as cloud computing was launch. Cars can drive themselves and virtual reality experiences like Pokémon Go were all anyone could talk about. The stock market also emerged from the 2008 Financial Crisis with gusto.

The Standard and Poors 500 closed at record levels, 3168.80, this past Friday (12/13). The last trading day of 2009 saw a close of 1115.10 on the S&P 500. Decade-to-date, the S&P 500 has appreciated  184.2%! On a points basis, there is no question this is the largest bull run in history, however, on a percentage basis, it comes in as the fourth most profitable decade. A firm transition into the Information Age during the 1990s, fueled by the Internet and the dot coms, fueled a 315% decade, most market gains coming between 1995 and 1999.

The post-war 1950s decade ranks as the second largest percentage gains for the S&P while the 1980s, energized by trickle-down economics and significant banking reforms rounds out the top three. Casting off the arbitrary decade divisions and comparing the same week of the year to that same week ten years removed, reveals only one stretch where growth was consistently greater than 315% - the end of 1997 through week two of 2001, just before the Tech Meltdown. Stated another way, the late 1980s through the late 1990s saw the greatest ten year growth, as a percentage, as any other period in history.

Table 2 above illustrates a number of things that provide context from our current decade’s performance to those in the past. First off, to orient the reader to the table, the columns (x-axis) represent decades while the rows (y-axis) represent the year in that decade. For example, the first value in the table, -15.3, is percent change in the year ending in 19 40 . The value below that, -17.9, represents the change in the year ending in 1941. Every decade since the 1940s have gone up, sans the 2000s which started the decade with a bursting of the tech bubble and concluding with a significant pullback fueled by the housing crisis. The number of “up years” in our current decade is seven, which is the average for the 80 years depicted in the table. While the table provides a great depiction of how bullish the 2010s and the seven decades before it have been, the chart below adds punctuation to the last four decades of growth!

"Black Monday" and the crash of 1987- a huge selloff in its day- is barely a blip on the chart (blue ellipse) in comparison to today’s scale. The current decade’s move, which began in the middle of 2009 is impressive but keep in mind, it is only the fourth largest in history in percentage terms. The logarithmic shape of the 1990s move is tops in terms of percent change where the decade began with the S&P under 400 and ended above 1500.
​Now that there is context about where our decade fits in relative to the last ​several, let’s dig into the last ten years a bit more. 

We examined all 500 S&P companies, using today’s list, and compared their closing price on 12/31/2009 - the last day of the previous decade - against this past Friday’s (12/13/2019) close. (If the company went public after 2009, the first trading day’s price was utilized.) Table 3 details the top ten performers of the decade, based on percentage gain. Surprisingly, there is a fairly equal representation between Technology, Consumer Services, and Health Care. Also notable is that four of the ten are currently trading below 85% of their 52 week high, indicating their zenith is perhaps in the rearview.
 
In 2013, Jim Cramer of Mad Money coined the term FAANG to represent some of the more popular technology and consumer services companies. The five companies in FAANG are:  F acebook (FB),  A pple (AAPL),  A mazon (AMZN),  N etflix (NFLX), and Alphabet /  G oogle (GOOGL). With all due respect to Mister Cramer, the author believes Microsoft (MSFT) should be included in the conglomerate and was likely omitted because it is less euphonious with the “M” in the mix. The chart below illustrates the FAANG + MSFT in terms of ​percentage change and relative change ranking when sorted against all 500 companies of the Standards and Poors.

These powerhouse companies receive a lot of attention, and rightfully so, but this illustrates approximately 20% of the S&P 500 had gains that outperformed FB, MSFT, and GOOGL. In other words, there was no shortage of opportunity if one had the ability to thoroughly scan the market and compare potential. Momentum Private Wealth Management has access to these types of toolsets.

The bulls have most definitely been on parade through the 2010s. Where do we go from here? Given the technical markers, it appears the Market will continue to appreciate in the near-term. It is also important to note the 500 instruments of the S&P are trading at an average of 89.9% of their 52 week high, another bullish sign

​Chart 3 is a side-by-side comparison of the monthly and weekly S&P 500 index chart. A proprietary strength indicator is in the sub chart below price. This indicator and why it is important to look across timeframes will be covered in future newsletters. For now, the take away is the black histogram is above both the green and magenta lines (red circles). This indicates the up-move will most likely continue while the formation is intact.
 
As mentioned above, there has been no shortage of strong gains to be had over the past year and in the last decade. Table 2 above (page 2) is actually an interesting reference to compare portfolio performance. The broader market has appreciated over 25% YTD. If your portfolio is lacking this type of performance, perhaps it is time for a review of your investment goals and objectives and what is possible within your risk profile.
 
“Most people overestimate what they can do in a year and underestimate what they can do in ten years.” - Bill Gates 1
 
As the focus shifts to the year 2020 and the new decade that will unfold, I encourage you to take control of your financial future. Momentum Private Wealth Management can help you achieve your goals.
 
Here’s to your health, wealth, and happiness in the coming year and decade.

1    goodreads.com ( https://www.goodreads.com/quotes/302999-most-people-overestimate-what-they-can-do-in-one-year )

Justin Toedtman is a market strategist and contributing editor to Momentum Private Wealth Management. For the last 20 years, his focus has been on technical analysis and market strategies.
 
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