Factors Impacting Financial Climate Change

Runnymede believes that monitoring the financial climate is important in order to be successful as an investor. With 24/7 news reporting, live tweeting, and high frequency trading, it is easy to be distracted by the daily noise and the immediate impact on stock prices. Rather than dealing in milliseconds, it can be helpful to take a step back for a different perspective. Below is a chart showing the total return of the S&P 500 by decade in which you can see that performance over the past six decades has been impressively positive until the last one.


Here are a few possible reasons why there may be a major change taking place:

  1. The longest war since 2003 still continues even after 12 years.
  2. The government’s debt to GDP has risen from 54% in 2000 to 103% in 2015.
  3. After the internet bubble burst in 2000, there was the housing bubble in 2008 and now the QE bubble. All bubbles burst, sooner or later.
  4. The Federal Reserve held $476 billion in Treasury securities in 2008. In order to support the financial markets, the Fed's balance sheet has grown in excess of $4.2 trillion by buying Treasuries and mortgage related securities.

Wars and high levels of debt have led to and will likely continue to result in financial market instability. The "buy and hold" strategy which was born after World War II that has served investors so well for decades may need reexamination. If the financial climate has changed, the past may not be repeated in the future unless the government can reverse its current negative trend with regard to its balance sheet. It’s prudent to at least consider the possibility that the long-term stock market trend may be going sideways and becoming more volatile in what remains of the current decade.

We have certainly seen volatility return in 2015. Just yesterday in the DJIA, we saw a 282-point rally in the morning and a 143-point decline in the afternoon. From yesterday's peak to today, we've seen a swing of more than 550 points! Do your best to ignore the noise and focus on what counts.

avoiding financial hurricanes

Do you think that investing in 2015 will require a fresh or different approach?
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About the Author: Andrew Wang

Andrew Wang


Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Runnymede Capital Management, Inc.-"Runnymede"), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Runnymede.  Please remember that if you are a Runnymede client, it remains your responsibility to advise Runnymede, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Runnymede is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Runnymede's current written disclosure Brochure discussing our advisory services and fees is available for review upon request. Please Note: Runnymede does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Runnymede's web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

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