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The S&P 500—Three Years Later

U.S. News and World Report Smarter Investor

It’s been three years since the S&P 500 bottomed out on March 9, 2009. That day, the index closed at 676.53. The index had not been that low since 1996. Since the index’s 676 close, it has skyrocketed, and while it hasn’t been a smooth ride for investors, the fact remains that if you had a good financial plan that kept you from panicking, you have likely recovered from the greatest recession we have seen since World War II.

But there’s more to it than that, because most investors don’t hold just the S&P 500. Sure, it’s a decent benchmark for equity investors to get a feel for how well they are doing, but it’s not likely that most investors are just long the S&P 500. They have exposure to other sectors as well.

For example, at Monument Wealth Management, we remained confident even throughout the major market pullbacks of 2010 and 2011 that the economy wasn’t heading into a double dip recession and that we were still in an economic recovery leading to an eventual expansion. As such, cyclical and economically sensitive sectors like technology and consumer discretionary (also referred to as consumer cyclicals) were good choices for overweighting, whereas traditionally defensive sectors such as telecom and utilities were not.

It turns out that over the past three years, those two cyclical sectors have been the top performers. Technology is up almost 210 percent and consumer discretionary is up just shy of 200 percent. Mark that against the returns of telecom and utilities, only up 67 percent and 72 percent, respectively.

The real point here is that if you take a long-term view with your investments and spend some time trying to determine where you are in the longer-term economic cycle, you can likely do pretty well over any short-term economic downturn—even the biggest economic downturn the world has seen since World War II.

In just the last year, we have dealt with the European debt crisis; the Arab Spring; regime changes in Egypt, Tunisia, and Libya; escalating tensions over Iran; the death of a leader in North Korea; U.S. political turmoil; and a volatile August where 60 percent of the trading days saw moves of greater than +/- 1 percent in the S&P 500…not to mention all of the bad news from 2010 and 2009. Even with all of that, investors that stuck with it have seen the S&P 500, as well as the tech and consumer discretionary sectors, rebound quite strongly.

I’m not trying to minimize the effects of what happened; I’m just saying that having a good plan should enable investors to remove emotion from the equation, and that’s a healthy place to be.

Read this article on U.S. News & World Report >

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendation for any individual. All performance references are historical and are not a guarantee of future results.

David B. photo

David B. Armstrong, CFA

President & Co-Founder

Dave got into the industry when he discovered his passion for finance in his mid-20’s. He’s a combat veteran and served as an officer in the United States Marines Corps on both active duty and in the reserves, retiring at the rank of Lieutenant Colonel. While serving on active duty, Dave was unable to spend money on deployments, so he became a self-taught investor. Along with a few bucks cash as a bouncer, his investing performance grew to be good....

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