History doesn’t repeat itself, but it most certainly rhymes.
We have experienced seemingly countless market panics/selloffs/bear markets throughout our firm’s history. Each and every event had the mainstream narrative proclaiming the end of the world was going to be soon upon us.
Important lesson: Never bet on the end of the world, it will only happen once.
Unfortunately, over the last several years, too many investors have had a ferocious appetite for growth at all costs stocks; with the ridiculous notion that the party would never end. The reality, just like we expected, and called today, and at the end of the 1990’s Dot Com run, and the real estate bubble of 2008-2009, was the fact that the music would indeed stop.
Stock market party time periods often end with a hangover that can last for some time. However, even decades that are maligned with malaise and substandard returns can produce excellent relative returns if you focus on dividend paying securities. In our Markowski Investments Rules of The Road, rule number one happens to be…Compounding is the royal road to riches.
If history does rhyme, we might expect lower returns for the overall market moving forward. We have exceeded historical norms over the past decade, we do believe that growth will return sooner rather than later, but market returns may be more muted than in the past. I don’t think the big Wall Street investment banks and venture capital firms will be spraying every would be “unicorn company” with a fire hose of cheap money for some time. It took a good fifteen years to get people to forget the lessons of the Dot Com era. Whereas dividend paying securities should always be the foundation of one’s portfolio, in an environment and terrain that we are looking at moving forward they should play an even larger part.