All of us have been struck by the turbulence in the market in recent weeks – huge swings both up and down. What happened to good old 2017 where we never had more than a 2% swing and, on many days, the major indices were recording new all-time highs?
Hate to say it, but the last 18 months were aberrations. In the last 120 years, we’ve had less than a dozen years like 2017. And, in each case the following year had at least one drop of 10% or more and multiple drops of 5% or more. Unfortunately, we’re back to a “normal” market and its very normal volatility.
Many of you are asking “Is this the end of the bull market?” Both our advisors from Merrill Lynch and all the well-respected investment advisors whose readings we follow all believe there is still more upside to come in this bull market. Merrill Lynch doesn’t foresee a possible recession in the US until the last half of 2019 or later and that, they feel, will be mild.
One of the reasons is that the US economy – and just as importantly, world economies – continue to strengthen. More than 75% of US companies reporting results for 2017 have surpassed analysts’ expectations, and average corporate earnings are projected to increase a whopping 16% in 2018, partly due to the tax bill that was passed in December and the recent budget spending bill.
So what’s a poor Finance or Endowment Chair supposed to do? How should you lead your committee? First, have courage and faith. Second, have open discussions with your committees about what you foresee in the economy and the markets. It’s very important to get everyone’s input so draw the quiet ones into the conversation. Third, think about the missional purpose of each of your funds. Fourth, think about your need for distributions from each fund (amount and timing).
Fifth, If you’re concerned about the markets and their future, determine the amounts of money you’ll need from a fund in each of the next 3 years or 5 years. Then consider setting those amounts aside in 1-year, 2-year, 3-year, 4-year and 5-year DevCo Investment certificates. You’ll earn guaranteed interest and have the money available when you need it. Most of us believe that, despite ups and downs, money left in a Foundation Stock, Balanced or Balanced Plus fund will be worth more in 5 years than it is today.
As always, we would be happy to help you think through these questions and develop an investment strategy to achieve your goals. Please feel free to call Ted Soto at 804-521-1122 to arrange such a meeting.