Forgotten Lessons
- Stocks and bonds began 2023 very well. Should we expect this good performance to continue?
- To have a view on the rest of 2023, we need to understand why performance is so good so far.
- I’ve written about several lessons that help put current markets into perspective. They shouldn’t be forgotten.
When will they ever learn? When will they ever learn? Lyric from “Where Have All the Flowers Gone” by Pete Seeger.
So far 2023 has been a recovery from a disappointing 2022, but is it a head fake or a resumption of an incredible 13-year run-up from 2009-2021? Year-to-date stocks are up 6% and bonds are up 2%. That’s 26% and 8% annualized. This is cause for cautious optimism.
But before we celebrate that the recession witch is dead, lets revisit a couple of my articles that aim to learn from the past, namely:
Harbingers from Venezuela, Japan and China highlights the lessons that can be learned from the experiences of these three countries.
And
Behavioral Finance Explains The Stock Market Bubble explains why investors do not behave rationally.
Please use these links to read these articles. Here’s a brief overview.
Harbingers from Venezuela, Japan and China
Venezuela
As its inflation skyrocketed the Venezuelan stock market performed best in the world in 2016, earning 114% versus 13% on the Dow. This event has direct application to the recent US stock market. According to this Marion West article:
Owners of the country’s currency protected themselves from the currency’s severe devaluation by exchanging their bolivars for seemingly safer assets, including stocks. With huge volumes of money pouring in, the stock market artificially inflated.
Japan
Advocates of Modern Monetary Theory (MMT) and money printing point to Japan because their economy has limped along without a serious blow-up, yet. It’s like the optimist falling from the skyscraper saying “So far, so good.”
China
China is determined to become the world’s largest economy, and they will probably succeed. One of the prizes will be taking over the role of the world’s trading currency. Debasing the $US plays right into China’s hands. The US has printed $14 trillion over the past 13 years, which is more than all our recent wars combined, and more spending is likely.
Behavioral Finance Explains The Stock Market Bubble
Conclusion
The pain might be over. We all hope it is. But ignoring our current threats is not smart. Be prepared for the worst and hope for the best.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Ron Surz
Ronald Surz is co-host of the Baby Boomer Investing Show and president of Target Date Solutions and Age Sage, Target Date Solutions serves institutional investors, namely 401(k) plans. Age Sage serves do-it-yourself individual investors. His passion is helping his fellow baby boomers at this critical time in their lives when they are relying on their lifetime savings to support a retirement with dignity, so he wrote a book Baby Boomer Investing in the Perilous 2020s and he provides a financial educational curriculum.Ron Surz is president of Target Date Solutions, developer of the patented Safe Landing Glide Path, Soteria personalized target date accounts, and Age Sage do-it-yourself investing. He is also co-host of the Baby Boomer Investing Show.
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