• Top 5 Reads of the Week | 361 Capital Blog  

    Our favorite reads of the week and the quotes that make them worthy…

    Business cycles in the future may resemble those of the 19th century, when monetary policy didn’t exist. From 1854 to 1913, the U.S. had 15 recessions, according to the National Bureau of Economic Research, the academic research group that dates business cycles. Many were severe.

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    We recently hosted a 2019 Market Review & 2020 Outlook with Blaine Rollins, CFA, author of our popular 361 Weekly Research Briefing. We had several interesting questions come in from attendees so we thought we would use this week’s blog to share Blaine’s responses.

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    As a student of the capital markets, I tend to group stock market events in memorable periods of time. An easy time frame to reflect upon is a decade and then working backward over the past century, ignoring detail and nuance. In other words, it’s easy to summarize each decade with only a few words.

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    During the 3rd quarter, Morningstar reported that over $95 billion flowed out of active U.S. Equity strategies and into passive and semi-passive investment portfolios. Net funds have flowed out of active and into passive vehicles in 68 of the past 69 months, and as the chart below depicts, since 2008, over $3 trillion has flowed out of actively managed strategies and into passive vehicles.

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    We are days away from closing out the decade and what an incredible decade it has been for equity investors. Annual returns since 1957 for the S&P 500 Index averaged about 8%, with volatility around 15%; but since January 2010, equities have annualized at 13.3% with volatility at 12.5%. People often think of negative results when they think of black swans, but maybe this was an extremely positive one! Given this incredible result, I’m left questioning why to diversify at all—because clearly it didn’t do anything for you this decade.