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Weekly investment strategy

Review the latest Weekly Headings by CIO Larry Adam.

Key Takeaways

  • Periods of uncertainty provide valuable lessons
  • Technology has changed the investment landscape
  • Asset allocation principles have stood the test of time

Join us in celebrating our 60 year anniversary with a toast to success for our next 60 years! In 1962, Raymond James was founded as a small family-owned investment firm with a mission of putting the person first in personal finances. While we have transformed into a diversified financial services firm with international reach, our pledge remains the same—we put clients first! Since its founding six decades ago, we have experienced some of the best and worst times for the economy and financial markets. Since there are inevitably more of each to come, we hope our investment strategy communications are useful as you “look at life and finance from every angle.” As we honor this milestone, we highlight the lessons learned, the equity market’s performance, and the investment principles that have stood the test of time.

  • Lessons Learned | Economic and market events can be unpredictable, but it is up to corporate leaders, policymakers, and investors to take past experiences into account in future actions. Since 1962, there have been eight recessions, nine bear markets, fifteen presidential elections, three pandemics, and countless wars and geopolitical events (e.g., the Cuban Missile Crisis, the Gulf War, the 9/11 Terrorist Attacks). While periods of uncertainty are uncomfortable, they teach lessons, serve as a roadmap for future decisions, and give investors belief in the resiliency of the markets. Raymond James has outlived these downturns thanks to the more conservative management style it adopted after learning a lesson on leverage. During the 1973-74 bear market, the combination of the oil embargo, collapse of Bretton Woods monetary agreement, and devaluation of the dollar had the firm on the brink of collapse. But with a little luck, the market began to recover and Raymond James survived the near fateful moment. Fast forward to the 2009 mortgage crisis, and Raymond James not only survived, but remained profitable and stable during the worst leverage-induced economic challenges since the Great Depression while other firms closed their doors.
  • Adapting To Change | In 1962, the US was a $603 billion economy, the 10-year Treasury yield was 4%, the average income was $5,500, the average home price was $12,500, gasoline was $0.30 per gallon, the S&P 500 was at ~60, and General Motors was the largest S&P 500 company. Today, the US has a $23 trillion economy, the 10-year Treasury yield is 2.9%, the average income is nearly $42,000, the average home price is $440,000, gasoline is $3.93 per gallon, the S&P 500 is around 4,280, and Apple is the largest company with profits 100x those of General Motors back in the 1960s. In short, there have been significant economic and financial market changes over the last sixty years! Even the approach to investing is vastly different with the advent of detailed financial planning, the birth of different investment vehicles (the first exchange traded fund (ETF) was created in 1990 and there are ~2,700 today!), and the arrival of the internet and smartphones bringing financial data at the touch of a button. If there’s one thing that hasn’t changed, it is our approach. In the words of founder Bob James, “It all begins with listening to people and accurately assessing their true financial needs.” While market conditions may change, our people first mindset remains resolute.
  • Tried And True Investment Principles | This milestone anniversary is the perfect time to remind investors of some of the steadfast and timeless principles of investing and asset allocation:
    • People Driven | Timing the market and allowing emotions to dictate decisions can be detrimental to a portfolio. Case in point: the annualized price return for the S&P 500 over the last 60 years is ~7.4%. But for investors who missed the top 25 best trading days (out of 15,130 total!), it would have cut their average annualized return to 4.6%. Having a long-term investment horizon and an advisor who understands your goals is paramount in navigating short-term volatility successfully.
    • Values Built | At Raymond James, we value independence and independent thinking. Therefore, we encourage investors to focus on their unique goals, rather than following the sentiment of the crowd. Time and time again, history shows that extreme levels of ‘crowd’ optimism and pessimism can lead investors to stray from their well-established asset allocation strategy. Oftentimes, being a contrarian and not getting caught up in the crowd mentality has proven to be more successful.
    • Future Focused | Even investors with decades-long time horizons can get distracted by near-term performance. As a reminder of the resiliency of the markets and the power of compounding, assume an investment of $100 per month in the S&P 500 beginning in August 1962. Over this sixty-year time period, the investor would have deposited a total of $72,000. Through all the aforementioned major market events, the initial investment still would have increased ~20x for a market value today in excess of $1.4 million! This illustrates that consistent inflows and a long-term horizon can weather the market storms.

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All expressions of opinion reflect the judgment of the author(s) and the Investment Strategy Committee, and are subject to change. This information should not be construed as a recommendation. The foregoing content is subject to change at any time without notice. Content provided herein is for informational purposes only. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices and peer groups are not available for direct investment. Any investor who attempts to mimic the performance of an index or peer group would incur fees and expenses that would reduce returns. No investment strategy can guarantee success. Economic and market conditions are subject to change. Investing involves risks including the possible loss of capital.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Diversification and asset allocation do not ensure a profit or protect against a loss.

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