What Year Is It?

Investors are unhappy because the Fed is raising rates even though inflation appears quiet. The president is ready to slap tariffs on the world's No. 2 economy. The media and Congress are putting pressure on the president that may result in an impeachment vote. The stock market had been doing well early in the year, but was slammed in the second half.

Is it 2018? No, the year we are referring to is 1994. Back then, with Treasury yields rising slightly, the Greenspan Fed surprised the market and began raising the federal funds rate while investors claimed there was no inflation. President Bill Clinton threatened tariffs all year on Japanese auto imports -- and he followed through in May 1995 with 100% tariffs. He also survived an impeachment proceeding (though this began in 1995).

The stock market had been doing well in 1993 and early 1994, but sputtered into year-end; the S&P 500 finished with a 1.5% decline for the full year 1994. Overall, the fundamentals were solid. If it is any consolation, the following years (1995-1999) are among the best five-year stretch in stock-market history. (Argus Research Co.†)

We didn’t write this one in house but felt it was a timely piece to keep our perspective.  The global markets have been under pressure this year, but it’s important to remember that making money over time doesn’t mean making money all the time. Stocks and bonds have been through periods like this in history and still provided benefits to investors who stick with it.