So Far so Good: The Decrepit Decade Winds Down

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.


Stocks have reached what looks like a permanently high plateau
Irving Fisher, Economics professor, Yale University, 1929


As we near the end of what is likely to be the worst calendar decade on record, we might be inclined to say “so far so good” about the first nine months of 2009. As Irving Fisher would surely lament, we need to wait for the finale.

U.S. stock markets have returned 22% thus far in 2009, bringing the annualized return for the 9.75 years of the 2000s up to a loss of only 1.6% per year. As we entered 2009, the nine-year average annual loss stood at 4%. A return of 17% in the fourth quarter of 2009 would bring the decade to breakeven, and we would have posted a whopping 43% return for this year - exceptional but not unprecedented.

Five calendar years have had returns in excess of 40%: 1928, 1933, 1935, 1954 and 1958.

Annualized S&P

So what has been working so far this year? In the following, I review the past nine months in both the U.S. and the non-U.S. markets. Then I reveal a very important fact about style indexes: the choice of classification variable matters a lot, especially in this current mess.

I conclude with a plea for your help, which I’d really appreciate.

The first nine months of 2009

As the next chart shows, all US style posted double-digit returns for the first nine months of 2009, in stark contrast to the devastation in the second half of 2008. Smaller companies fared best, as did growth stocks, led by Information Technology. I use Surz Styles and Country indexes throughout this commentary, as described here.     

Style Returns