It’s All In How You Look At It

Written by Roger Hewins, President, and Founder of Team Hewins

Welcome to a new decade!

This decade just seemed to fly past. The last thing I remember, the market was rebounding sharply in 2009 after the Great Recession. We started a new decade with a weak economy but a good equity market, predicted by exactly nobody, the V-shaped recovery everyone said was impossible. And the next thing you know it is ending with a strong economy and a bull market, without a recession or even much of a bear market along the way. Maybe the pain of two crashes and recessions in the previous decade — the so-called “lost decade” — were enough for a while, so we caught a break.

What a great year!

2019 was certainly a great calendar year for equities¹. Even bonds produced stellar returns for the year, as the Fed sharply reversed course and lowered interest rates².

On the other hand, when you include the bad fourth quarter of 2018 you see a very different picture. The total return of 10.8% for the S&P 500 for five quarters looks more like the long-term averages. As you may recall, in 2018 the index fell 13.5% in the fourth quarter, and 9.0% in the month of December alone. Christmas Eve 2018 saw a one-day decline of 2.7%³, and there seemed to be panic in the air, prompting us to actually write a letter on the topic early Christmas morning.

Basically, the market was fearful and dropped sharply in the quarter, culminating with the worst Christmas Eve in a very long time. But that was it. What followed was less fear and therefore a rapid recovery of what had been lost, starting with a bang the day after Christmas. Markets work that way — they often react quickly and sharply to changes in expectations, but it seems to average out over time if we are patient.

So what were those expectations?

You will read and hear lots of analysis if you look for it. It does seem that Fed policy “roiled the markets⁴” in late 2018 with too many interest rate increases and then, horrified by the devastation they had wreaked on the markets, they did a 180 and dropped the Fed Funds rate back down. Markets seemed to like it!

That being said, we think it is always important to remember how many other factors are involved, many of them things we know little about. We hear a lot about China these days, and several of our letters discussed some of the China issues, but do any of us really know what is going on behind the scenes? Perhaps the market events we observed were not simply the result of headlines and Fed policy; we may never know what “the market” in its wisdom saw coming.

What we do know is that a lot of people and firms, including some professionals who should have known better, gave in to the fear and raised some cash last year, and were slow to get back in.⁵ These things can be fast and erratic, and defy prediction. Perhaps we should view this past year and the one before it, taken together, as a microcosm of our long-term experience in capital markets. In the short run there is drama, fear and greed, excitement and dismay. In the long run we believe there are reasonable returns.

Happy New Year from all of us!

Roger Hewins

¹ S&P 500 Index was up 31.5% in 2019. Source: Morningstar, Inc.

² Barclays Bloomberg Aggregate Index was up 8.72% in 2019. Source: Morningstar, Inc.

³ Source: Morningstar, Inc.

⁴ I love that phrase! Do you ever hear the word “roiled” except in this phrase?

⁵ See our recent blog ( citing a Wall Street Journal article about flows out of equity funds and cash on the sidelines.

Team Hewins, LLC (“Team Hewins”) is an SEC registered investment adviser; however, such registration does not imply a certain level of skill or training and no inference to the contrary should be made. The information contained within this letter is for informational purposes only and should not be considered investment advice or a recommendation to buy or sell any types of securities. Past performance is not a guarantee of future returns. It should not be assumed that diversification protects a portfolio from loss or that the diversification in a portfolio will produce profitable results. The opinions stated herein are as of the date of this letter and are subject to change. The information contained within this letter is compiled from sources Team Hewins believes to be reliable, but we cannot guarantee accuracy. We provide this information with the understanding that we are not engaged in rendering legal, accounting, or tax services. We recommend that all investors seek out the services of competent professionals in any of the aforementioned areas. For detailed information about our services and fees, please read our Form ADV Part 2A, which can be found at or you can call us and request a copy at (650) 620–3040.

Originally published at on January 10, 2020.

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