What happened in 2009? The S&P 500 started a climb from 6,600 to over 34,000!

In their survey of global fund managers, Bank of America found that investors are the most bearish they have been since 2009.1 That is worse than 2020, during the pandemic that shut down much of the world. Those fund managers are concerned with a variety of possible problems. At the top of the list is counterparty risk (where one party to a contract defaults). Then, in order of concern, comes systemic credit risk (like Silicon Valley Bank), continued inflation, geopolitical risk, hawkish central banks, and, finally, a deep recession.

It almost sounds like the ailments of a hypochondriac talking to their doctor.

I wonder if it was times like these that led John Templeton, one of the great investors, to say, “bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria.” During the secular bull market that began in 1979 and lasted until March 2000, there were several setbacks. One on October 19, 1987, which saw the worst one-day market plunge in history. Another happened when Alan Greenspan, as head of the Federal Reserve, started raising interest rates.

Historically, these trends tend to occur at the bottom of markets.

For all the doom and gloom about the United States and its economic outlook, the Economist had a good analysis.2 While the United States is no longer the biggest economy in terms of purchasing parity (China is), the US GDP is 25% of world GDP compared to China’s 18%. That 25% of world GDP is about the same as it was in 1990. During that same period from 1990 through 2022, the United States share of the GDP of G-7 nations has grown to 58% from 40%. (The G-7 nations: United States, United Kingdom, Germany, France, Japan, Italy and Canada).

Since 1990, per capita income has grown 30% in the United States while the G-7 nations has grown 24%. Compared to Japan, the US per capita income has grown 54% vs 17%. Social spending as part of GDP has grown from 14% in 1990 to 18% in 2019, due mainly to better medical care.

$1,000 invested in the S&P 500 in 1990 would have grown to $23,000 in 2023. $1,000 invested in an index of the biggest, richest countries around the world would have only grown to $5,100. US Financial markets measure at 170% of GDP compared to the rest of the developed world, at less than 100%. There were 5.4 million new start-up companies in 2021, an increase of 53% over 2019. Not all of these new companies will survive, but the penalty for failure in the United States and Canada is not as extreme as most other countries. The mantra of new entrepreneurs is “fail forward”, learning from their mistakes and making additional attempts after failures.

People employed in the United States work an average of 1,800 hours a year. In Europe they work just 1,600 hours and in China 1,300 hours. Not only do US workers spend more time at their job, they are also historically more productive. Productivity in the US has grown 67% since 1990. European productivity increased 55% and Japanese productivity 51%. US workers are more mobile, with one in four having moved locations in the past five years compared to one in ten in other developed nations.

The US spends more on R&D and education than the rest of the developed world, with over 1/3 of the population having post-secondary education. Only Singapore has a greater number of its population educated.

I’m encouraged by what I see, and all the negative I hear reminds me of people like Andrew Roberts of the Royal Bank of Scotland, Marc Faber, known as Dr. Doom, and author Michael Lombardi. They were known for predicting world-ending market declines… which never occurred. In June 2010, Roberts shouted about the coming stock market where you would have to think the “unthinkable” it would be so bad and that before the end of 2010. Marc Faber predicted in 2009 a 100% hyperinflation by 2010 and a 1987-type crash with no warning in 2013. Michael Lombardi also liked the year 2013, and he predicted a “Great Crash” that, he said, would leave blood in the streets.

Maybe it is like this expression: “There is a reason the rear-view mirror is so small and the windshield is so big. Where you are going is so much more important than where you have been.”

Check out our first quarter 2023 results. Are they an indication of where we are going? Don’t overlook the 5-year, 7-year, and 10-year results and the results from inception. The odds of doing that by luck are 1 in 250,000. Where we are going is so much more important than where we have been. With that, we have to say that past performance is no guarantee of future performance.

1. Jaisinghani, Sagarika, and Jessica Menton. “Investors Are the Most Bearish on Stocks versus Bonds since 2009.” Yahoo! Finance. Yahoo!, April 18, 2023. https://finance.yahoo.com/news/investors-most-underweight-stocks-versus-080438113.html?fr=sycsrp_catchall&guccounter=1.

2. Ryan, Pete. “The Lessons from America’s Astonishing Economic Record.” The Economist. The Economist Newspaper, April 13, 2023. https://www.economist.com/leaders/2023/04/13/the-lessons-from-americas-astonishing-economic-record.