“2010’s, A Decade in Review”

As the 2010’s decade draws to a close we thought it important to pause and take a look back at how the financial landscape has changed from 2010 through 2019.  Remember how bleak things looked in 2010 as investors had just come off the back of one of the worst recessions in American history? From 2000 to 2009 the US had the worst decade for the stock market since the Great Depression plagued 1930’s.  Thankfully, the coming 10 years were markedly different and goes to show the power of the oft referred to “boom and bust” cycle.  In this article, we look at a few of the top stories in the financial world over the past 10 years.

The Decade of the Bull

Since 1926, there have been 13 bull markets, classified as a period when stocks are rising without at least a 20% decline. On average, these bull markets have lasted 53 months or roughly 4 ½ years.  To put things in perspective, the current bull market just turned 129 months old in December 2019 and the next longest in history was 113 months in the early 90’s.  We are now almost 1 ½ years longer than any other bull market in the history of the United States.  Why has the rally been sustained? Well, the market was coming off of a very depressed base in 2009 where the S&P 500 actually finished 24% lower than when it started the decade in 2000.  In addition to a low base, monetary and fiscal policy decisions within the US and globally have led to interest rates at or near 0% (in some cases negative!) which has helped to sustain the unprecedented run.

Interest Rates Go low, then spike, then lower again

The federal funds rate, which is the one that gets the most publicity whenever the Federal Open Market Committee (FOMC) meet had an interesting ride throughout the past decade.  Despite the bull market picture we just described, the federal funds rate doesn’t always move in tandem with the stock market.  From 2010 until December 2015, the Federal Reserve Board and FOMC held the interest rate in the range of 0.00% to 0.25%.  Then starting in December 2015 and through December 2018 (3 year window), the Federal Reserve increased rates to a range of 2.25% to 2.5%.  The increase during this time was coupled with record low unemployment figures, an expanding stock market, and controlled inflation.  However, many believe that the rapid increases throughout 2018 were short sited and the market corrections throughout 2018, coupled with increasing trade tensions, actually led the federal reserve to reverse course and decrease the interest rate three times throughout 2019 to our now current level of 1.50% to 1.75%.  From a historical perspective, interest rates right now are extremely low and it will be interesting to see if we have entered into a “new normal” with interest rates or whether the 2020’s will see rate increases closer to historical average (4.75% since 1954).

Student Debt goes high, then higher, and higher again

Over the past decade, student loan debt has increased significantly and now sits at just over $1.6 Trillion (with a “T”) and is a problem for over 45 Million Americans.  Since 2008, the average debt that a student graduates with has increased over 40% from $21,211 in 2008 to $29,843 in 2018.  This $8,000 increase might not sound like an astronomical figure, but it doesn’t account for the fact that many current debt holders are not paying enough to decrease their debt balance.  This has lead to the overall debt balance more than doubling since 2009 according to the Federal Reserve.  As tuition continues to rise, and the ROI on a college degree goes south, we expect this tension will lead to some significant changes from either a legislative perspective or in how education is delivered and paid for after high school.

Take an opportunity over the holiday break to think about your personal circumstances going into 2020 and identify how you want your next decade to be defined.  Reach out to us if you have any questions and have a safe and blessed new year!

December 27th, 2019