The past five years of S&P Index fund investors have been particular stellar; however, on the basis of recent market history, you should definitely consider whether or not the next five years’ return will be anything even remotely as nice.
Why? Because the S&P 10-year bond rate is getting extremely close to dropping down below the two-year bond rate. Any worries about down-turning of the stock market because of fears of trade wars, economic excess, or perhaps even some element that is not currently on the radar, could all possibly cause funds to start flooding into long-term Treasury bonds for a short-term “safe haven.”
Also, it seems that the Fed is dead set on continuing to increase shorter-term interest rates in an effort to battle the threat that inflation causes and to rectify the last decade’s excess monetary policy, it’s not hard to realize how the 10-2 Yield Spread could certainly turn negative. What that usually means is that there’s a recession not too far away. And even if it isn’t just around the next corner, the market, in general, has made worrying about the happenings over the months to a few years in the future, an ongoing habit.
Can you even imagine how a modern investor in today’s market would react when they view their portfolio and realize that they’ve actually lost funds for five years straight? They’d probably be wondering how that could have happened when they had been doing so well beforehand.
But the fact is, even if they were doing well, bull markets are usually quickly wiped out by bear markets, ultimately leaving unsuspecting long-term investors both traumatized and disappointed.
The major trend in the process of shifting and investors need to view their approach quite differently.
