Young Research & Publishing Inc.

Investment Research Since 1978

Disclosure

  • About Us
    • Contributors
    • Archives
    • Dick Young’s Safe America
    • The Final Richard C. Young’s Intelligence Report
    • You’ve Read The Last Issue of Intelligence Report, Now What?
    • Dick Young’s Research Key: Anecdotal Evidence Gathering
    • Crisis at Vanguard
  • Investment Analysis
    • Bonds
    • Currencies and Gold
    • Dividend Investing
    • ETFs & Funds
    • Investment Strategy
    • Retirement Investing
    • Stocks
    • The Efficient Frontier
  • Investment Counsel
  • Dynamic Maximizers®
  • Retirement Compounders®
  • Free Email Signup

The One Thing Investors Forget Late in A Bull Market

March 25, 2019 By Jeremy Jones, CFA

More than ten years into a bull market it’s easy to forget that your investment portfolio (assuming it has been crafted properly) was designed for a full investment cycle.

How do you invest for a full-cycle investment cycle? When you invest for the full-cycle, you not only focus on how your portfolio will do when risk sentiment is at a peak, but you also consider how your portfolio will hold up when risk sentiment plunges.

There may not be a better reminder of the power of full-cycle investing than the performance of Consumer Staples stocks over the last three decades.

The Power of Full Market Cycle Investing

The first chart shows the performance of the S&P 500 Consumer Staples versus the S&P 500 starting at the bear market low in October of 1990.

Staples kept pace with the S&P 500 for most of the bull market, but then started to lag badly in 1999 and 2000 when “new economy” stocks stole the spotlight. At their lowest relative performance point, Staples stocks had lagged the S&P 500 by almost 50 percentage points.

Consumer Staples Stocks Win Over the Full Cycle

What happened as the cycle ended? Consumer Staples stocks pulled ahead of the S&P 500, providing investors with a higher full-cycle return.

Staples stocks carved out a similar path in the 2002-2009 cycle. Consumer shares trailed the S&P 500 badly for almost the entire cycle. In fact, at the bull market peak in 2007, the S&P 500 was up a compounded 17.1% compared to a 9.4% gain for Consumer Staples index—a yawning divide of almost eight percentage points.

But by the time the bear market ended, staples stocks were once again ahead. This is despite the fact that staples shares lagged the broader index for 72 of 77 month cycle.

That’s no joke. Read that again if you brushed by it. For over 90% of the time during the 2002-2009 cycle, an investor in consumer shares would have likely been questioning his investment decisions or his investment manager’s decisions. Yet, in the end, he came out ahead and did so with a smoother ride.

That brings us to the current cycle. This cycle is now over ten years old after being saved not once or twice by the plunge protection team at the Federal Reserve, but now what may turn out to be a third time.

There’s no doubt this cycle has dragged for the defensive investor. Ten years is a long cycle and it hasn’t ended yet. But despite all efforts to the contrary, this cycle too will end and while there is no guarantee consumer shares will come out ahead, the historical record suggests exactly that.

Cycles are part of the investing landscape. There are stock market cycles, value/growth cycles, domestic/international cycles, and credit cycles to name just a few. The savvy investor crafts and evaluates his portfolio after considering both sides of the cycle. We strongly advise you to do the same.

Patience is your greatest investment ally.

Share this:

  • Email
  • Twitter
  • Facebook

You Might Also Like:

  • Looks Like a Bull Market in Gold
  • What’s Behind the Bull Run in Emerging Market Stocks?
  • When Will this Bull Market End? Because it Will End
  • Author
  • Recent Posts
Jeremy Jones, CFA
Jeremy Jones, CFA, CFP® is the Director of Research at Young Research & Publishing Inc., and the Chief Investment Officer at Richard C. Young & Co., Ltd. Richard C. Young & Co., Ltd. was ranked #5 in CNBC's 2021 Financial Advisor Top 100. Jeremy is also a contributing editor of youngresearch.com.
Latest posts by Jeremy Jones, CFA (see all)
  • BULLWHIPPED? Inventory Overhang Could Slow Growth in Certain Sectors - May 20, 2022
  • MARKET TURNING: Canada’s Housing Market Turmoil - May 19, 2022
  • HORDING CASH: Funds Hold the Highest Level of Cash Since 9/11 - May 18, 2022

Search Young Research

Most Popular

  • MARKET CHAOS: This May Take Time, Here’s How to Prepare
  • PRICES SOAR: Diesel Shortage Could Cripple America's Economy
  • Your Survival Guy: “Sell in May, Buy After Labor Day?”
  • All-Powerful Money Managers Voting YOUR Money Targeted by Senate GOP
  • Institutional Investors Fall in Love with Oil, Again
  • COMMODITY CRUNCH: Will Tesla Buy a Cobalt Mine?
  • The Power of a Compound Interest Table
  • CRYPTO: Has the Fire Gone Out?
  • The Innovation Bubble Goes Bust
  • HORDING CASH: Funds Hold the Highest Level of Cash Since 9/11

Don’t Miss

Default Risk Among the Many Concerns with Annuities

Risk and Reward: An Efficient Frontier

How to be a Billionaire: Proven Strategies from the Titans of Wealth

Could this Be the Vanguard GNMA Winning Edge?

Cryptocosm and Life After Google

Warning: Avoid Mutual Fund Year End Distributions

Is Gold a Good Long-term Investment?

How to Invest in Gold

Vanguard Wellington (VWELX): The Original Balanced Fund

What is the Best Gold ETF for Investing and Trading?

Procter & Gamble (PG) Stock: The Only True Dividend King

The Dividend King of the North

You’ll Love This if You’re Dreaming of an Active Retirement Life

RSS The Latest at Richardcyoung.com

  • Joe Biden – Malicious, Incompetent, a Wannabe Left Wing Ideologue?
  • Jean-Pierre: Economy “Not Something that We Keep an Eye on Every Day”
  • Job Market Survival Advice for Graduates and for Those YOU Love
  • The Destructive Rise and Fall of BLM
  • What Would We Do without the Experts?
  • V4 Stands Against North African and Middle Eastern Invasion
  • BUY THE DIPS? Can You Catch a Ginsu Knife?
  • Florida: Enjoy Certain Freedoms and Individual Liberties
  • ENERGY FREEDOM ACT: Ted Cruz Introduces Bill for Energy Independence
  • Consequences of Biden Killing the Keystone Pipeline

About Us

  • About Young Research
  • Archives
  • Contributors

Our Partners

  • Richard C. Young & Co.
  • Richardcyoung.com

Copyright © 2022 | Terms & Conditions

 

Loading Comments...
 

    loading Cancel
    Post was not sent - check your email addresses!
    Email check failed, please try again
    Sorry, your blog cannot share posts by email.