It’s hard to think all the way back to January 2016, but the year began with a bit of a shock when US stocks had their worst start in history. Then came the Brexit vote in June, when non-US Stocks dropped approximately 7% over a three week period. And then came the US Presidential election, when US stocks dropped approximately 5% in the weeks leading up to the election.
But by the end of the year, those investors who stayed the course saw positive returns across the board.1
One particularly remarkable result was the performance of US small-cap value stocks. Over the past few years, this category has lagged both large company and growth stocks. But in 2016, the category, as measured by the Russell 2000 Value Index, returned more than 31%; that’s almost 20% more than the S&P 500. Those investors who maintained their constant exposure to small cap value stocks as part of a long-term investment plan were rewarded.
Looking Forward
As we look back on the year of surprises, it’s natural to wonder what to expect in 2017. As 2016 showed and has been illustrated time and time again over history, we cannot predict how the markets will respond to world events or to market indices reaching new milestones. But we can control how we respond and we can position ourselves to make the most of whatever the future will hold.
Instead of getting too hung up on the forecasts from pundits, prognosticators or politicians, perhaps we should take a moment to pause and celebrate the force that has been the primary driver of our financial markets over the long run: human enterprise.
Our capital markets are, at heart, a place for people to participate in the business of being human. We express our humanity in the ways we choose to invest and the investments we choose to make. Based on the millennia of evidence to date, whenever we come together to invest in buildings and businesses, sales and services, hopes and dreams – we have collectively come out ahead. When we remember that the markets are comprised of billions of people and trillions of dollars, coming together to build innovative new services and solutions; all financed by people like us participating in our global capital markets, we are reminded of why the future is so promising.