What a difference a year makes! Hopefully anyway. Last year, the fourth quarter was not terribly worrisome, until its Christmas Eve Massacre of 2018. No direct casualties, but markets plummeted on an otherwise historically light trading day. The Dow erased 12.5% of its previous highs at the end of 2018. Overall, the markets are now nearing a 20% return for the current year. Fantastic returns, but comparing the 2018 high (26,828) to 2019 high so far (27,782) is a more tempered 3.5%.
Herein lies the folly of performance reports; even when factually supported, true numbers. Some say number don’t lie. Ultimately that is untrue because numbers are just words, and we all know that words can lie. Performance chasing may not be as lucrative as the uninitiated would perceive either. Not every strong performance is the start of a trend. It is about as predictive of future success as an academy award. Sometimes, a surprise Actor of the Year winner enjoys a prolific career after an award-winning break-out performance. But not reliably so.
Instead of get-rich-quick, the slow-and-steady approach wins the race. Setting a comfortable asset allocation with disciplined reallocations create the groundwork for reliable success in the markets. This quarter, my reallocation removed about 1% from Total Bond Market Index Fund, not surprisingly after the Federal Reserve Board opted to lower interest rates even further earlier in the quarter, creating a higher demand for existing bonds (as well as removing downward pressure on existing bonds that comes when interest rates rise). Those assets were then placed into the International Stock Market Index Fund, which was down considerably through a concoction of global market woes in almost every developed country.
