For 121 months, the U.S. economy has grown, and grown, and grown. It represents the longest run of economic growth since 1854. In real terms, that translates into hundreds of thousands of new jobs and double-digit returns in the stock market. But more than one economist (and history) predicts that we’ll experience a recession — eventually.
What’s a smart investor to do?
Here’s a hint. It doesn’t involve tea leaves or crystal balls. Instead, it starts with recognizing that investment markets don’t come with expiration dates. In fact, the worst thing you can do is try to predict what will happen next and base your investing decisions on those guesses. You might get it right once or twice, but long-term, it’s a path to financial frustration.
Instead of focusing on what might happen next in the markets, it can be helpful to better understand what’s happening now. We’re at a critical point in the history of the world. Within the last thirty years, we’ve seen the introduction and mass adoption of technologies that were once the stuff of science fiction.
Our world has gotten both smaller and bigger over those same years. We can travel to countries thousands of miles distant in a matter of hours, while modern companies have built global production chains spanning continents. All these changes combine into a world economy that looks nothing like it did even 50 years ago, let alone 100.
Understanding that the fundamentals of our economy have shifted drives the critical discussion around our need for diversified investment portfolios. Back in the day, it wasn’t uncommon for someone to only own stock in, say, AT&T or Coca-Cola. Certain companies were “safe” investments. The general public also didn’t have an easy way to access markets, so there wasn’t a widespread interest in buying and selling stocks like we see today.
All of this leads to a question that we’ve heard more than once: “Is this time different?” In other words, should you be doing something different because we’re on track for record-long growth?
The short answer: No — assuming you’re doing what you’re supposed to be doing.
So, what should you be doing? You’ve heard me say it before, but the good stuff that works doesn’t change:
- Save as much as you can
- Follow a well-diversified investment plan that considers where you’re at today and where you want to go tomorrow
- Avoid making bad decisions based on headlines and fear
Some folks refer to these suggestions as the Sunday School answers — they’re the easy answers that everyone gives. But funny enough, just because everyone knows them doesn’t mean everyone is doing them.
Over the coming weeks and months, there will be plenty of talk about a lot of economic issues, including the 2020 elections, trade negotiations, and business regulation to name a few. And depending on how long U.S. growth continues, I expect pundits will get louder as they try to outguess each other predicting the next recession.
But I’ll leave you with my prediction. At some point, something will happen that affects the U.S. and possibly the global economy. What that thing will be and when it will happen, well, I’ll leave that to the pundits. But what you can expect from me, and the folks at Strathmore Capital Advisors, is a willingness to help you ignore the noise and navigate the ups and downs of our ever-changing world.