We can all, at times, be guilty of following news in the financial media rather than the facts. Fear—or, as they say on Wall Street, "bearish" news—sells. In a world where the historical returns of publicly traded equities should generate nothing but optimism, it's somewhat surprising that any negativity remains among average investors.
Yet, here we are, focused on the negative issues highlighted in the financial media, mistaking the natural evolution of markets, rates, trade and inflation for the next Big One—the singular event that could bring markets to their knees. Perhaps we’re just seeing the forest for the trees, missing the bigger picture: assets in a market economy are structural outperformers. Perhaps we all benefit from having an investment partner—whether an advisor, a portfolio manager, a research team or an outsourced chief investment office—to help us behave rationally.
Reasons to Have Been Negative Over the Past Decade
Reflecting on the past decade, there are multiple reasons one might have become overly bearish on US equities. Without an analytical framework to ground investment decisions in facts rather than feelings, emotionally driven decisions could have forced investors out of equities into safer asset classes at any time:
- 2016: Political instability and the rise of Populism, MAGA, Antifa and the schism within American politics.
- 2017: Trade Wars and a move to de-globalize trade beginning with the Trump Presidency and amplified by supply chain disruptions during COVID-19.
- 2020: COVID-19 and the Global Pandemic.
- 2021: Inflation.
- 2022: Rapidly rising interest rates fueled by the Federal Reserve raising the Fed Funds rate starting in early 2022 and maintaining high rates through today.
- 2022, 2023: Geopolitics and wars, starting with the Russian invasion of Ukraine in 2022 and continuing with Hamas' attack on Israel on October 7, 2023, and the ensuing Israeli ground invasion of Gaza.
The Facts on the Ground
Yet, what a mistake it would have been to act on these fears! As seen in the table below, the annualized return for the S&P 500 over the past decade as of April 30, 2024, was 12.41%—available to any investor through low-cost, liquid index ETFs. This performance is before considering the benefits associated with improved factor exposures, risk reduction through diversification and tactical decisions that augment returns.
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Equity Returns
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1 Year
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3 Years
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5 Years
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10 Years
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S&P 500 Index
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22.66%
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8.06%
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13.19%
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12.41%
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Source: Bloomberg, as of 04/30/2024
Past performance is no guarantee of future results. One may not invest directly in an index.
Returns for periods greater than 1 year are annualized.
Frameworks and Partners
Instead of basing decisions on emotions and current topics focused on by the financial media, SS&C ALPS Advisors grounds our decisions in analysis, facts and—simply put—reality. Decision-making starts with our Capital Markets Assumptions, or estimated return expectations for each investable asset class with a long-term horizon (typically 10 years). We augment these long-term views with asset class-level research daily, weekly and during our quarterly Investment Committee meetings.
Each asset class team—Equities, Fixed Income, Real Estate and Commodities—bases their research on an asset class framework which we update regularly and post on our website for full transparency. Views are shared and debated during our quarterly Investment Committee meetings, where debate is encouraged, starting with a framework grounded in Macro Economic facts:
- Liquidity Cycle
- Inflation Cycle
- Growth Cycle
- Profit Cycle
We believe our investment decision framework is logical, flexible and transparent. It has served us well by keeping our decisions grounded in facts and analysis, most recently providing our team with the confidence to remain fully allocated to equities. While there are many effective investment frameworks out there, the point isn’t that everyone should use our framework. Rather, every investment decision should either be made using your own framework or with the help of a partner like SS&C ALPS Advisors who uses a framework.
Planting Trees
"The best time to plant a tree was twenty years ago. The second best time is today."
- Chinese Proverb
Sometimes we get so close to a situation we cannot see the bigger picture, seeing the forest for the trees. There are likely many investors today looking back at the prior decade of stock market returns with a degree of envy. On the other hand, there are also many investors who have benefited from equity returns over the past decade and have become complacent.
Returns over the coming decade will be different from the past decade. There will be different challenges, risks and reasons to be negative. Some may even prove to be legitimate reasons to avoid equities over a finite period of time. However, without a deeply held investment framework or a partner to aid in the investment decision-making process, investors run the risk of making emotional decisions to the detriment of long-term investment returns.
SS&C ALPS Advisors is here as a partner to help today and into the future.
Important Disclosures & Definitions
Federal Funds Rate: the target interest rate set by the Federal Open Market Committee (FOMC). This target is the rate at which the Fed suggests commercial banks borrow and lend their excess reserves to each other overnight.
S&P 500 Index: widely regarded as the best single gauge of large-cap US equities. The index includes 500 leading companies and covers approximately 80% of available market capitalization. One may not invest directly in an index.
AAI000691 05/14/2025
