“They began to gather in the small harvest they had, and to fit up their houses and dwellings against winter…” (William Bradford as quoted in Thanksgiving: The Holiday at the Heart of the American Experience by Melanie Kirkpatrick).
Here in New York, we are set to embark on a stretch of short winter days with far less daylight than the long, sunny days of summer. Earth’s axial tilt and New York’s latitude make this a predictable recurrence. Unfortunately, bull and bear markets follow no such pattern.
Robert R. TeeterManaging Director
Economic & Market Overview
Solid growth in employment and growing GDP and controlled inflation have been the hallmarks of support for continued strength in equities.
Finding Value in Quality
We are again pleased to share commentary from our top-notch equity team. Roger Vogel discusses Equities.
A History of Market Declines
However, we can look to the past for some perspective. In “A History of Market Declines”, we outline the depth, frequency, and duration of market declines. Understanding market history is an essential element of creating portfolios that are robust over the long-haul.
Inflation is a concept with many measurements and definitions. It is also being discussed with increasing frequency. Patrick Chovanec helps to frame some of the concepts and implications of inflation in a Q&A format.
Demystifying the Endowment Model
While endowment style investing has often embraced complexity, this approach has not always been rewarded. Drawing on eight years of experience managing a university endowment, Christopher Brown sheds some light on endowment and foundation investing.
Municipal Bond Update
We are again pleased to share commentary from our fixed income team. Patrick Bittner weighs in on Municipal Fixed Income.
Investment Outlook Summary
The Silvercrest Investment Policy & Strategy Group meets at least quarterly and we present a summary of our October meeting.
Economic & Market Overview
Source: BEA, as of September 30, 2017
Economic growth continues at a slow and steady pace, with a variety of contributing factors. At the core has been personal consumption. For this reason, we maintain a close eye on the health of employment, charted in terms of unemployment rate and total number employed.
Millions employed, 16 years and older
Source: Bureau of Labor Statistics, as of October 2017
The continuation of modest expansion in the economy and the rise in business confidence has supported an expanding job market.
While recent figures have been a bit disrupted by the major storms impacting the south, total U.S. employment continues to grow. There has been much attention paid to the relatively low unemployment rate as well as the participation rate; both play a key role in assessing whether or when wage inflation will accelerate. The emergence of improved productivity is another factor in considering possible wage inflation.
S&P 500 Total Return Index
Rolling 10-Year Return
Source: Bloomberg, as of October 31, 2017
It is instructive to review returns over a long-term horizon and to assess annualized returns on a rolling basis. As shown, the average 10-year annualized return for U.S. equities is 10.3% dating back to 1926. This is a good illustration of why equities play such a key role in long-term capital appreciation. Currently, while equities have recovered significantly following the 2008 financial crisis, 10-year returns remain below the long-term average. In large part, this is due to the very significant decline in 2008/2009. As those weak crisis-era returns drop out of the 10-year history, this profile will change. Another observation is that returns can remain well away from the average—either elevated or suppressed—for long stretches of time. While reversion to the mean does occur, it is not a clear or obvious timing tool. Finally, it can be observed that most of the time, returns over a 10-year horizon are positive.