JUNE / JULY | H FINANCIAL MANAGEMENT ARTICLES | ORIGINAL CONTENT BY GARRETT S. HOGE
Recently I had the privilege of attending an event sponsored by the Italian-American Cultural & Heritage Society of Washington County at the Southpointe Hilton Garden Inn. The keynote speaker, Dr. Angelo Armenti, Jr., President of California University of Pennsylvania, made some remarks that struck a chord with my own beliefs. He asserted, “Excellence and achievement come from adversity, not privilege; from hard work, not leisure; from enthusiasm, not apathy.” Dr. Armenti also pointed that this assertion is “true at every human level of organization, from the individual, to the team, to the nation and to the society or civilization.”
Dr. Armenti’s poignant comments were made, in part, as a reaction to gross overspending by the Greek government to support social programs that are one of the leading causes of their sovereign debt problems. As you know, these Greek debt problems, along with the debt problems of Portugal, Italy, Ireland, and Spain (the so-called PIIGS), have caused a great deal of unrest in the world equity markets at a time when we are still recovering from the latest market downturn. The idea that citizens are entitled to handouts from the government is rampant in these countries. Not only have the problems in Europe unfortunately overshadowed our equity markets at home, but there may be a lesson to be learned for Americans given the recent increases in social program spending in our own country.
However, I believe that most individuals in the United States of America are different from those in European countries in terms of mettle and belief. The majority of our citizens believe that hard work pays off, entrepreneurship fuels the economy, and that paying less tax will allow them to do more for the country through their business endeavors. What sets us apart from Europe is the American dream to achieve a better life for ourselves if we desire and to make our country stronger in the process. We should remember John F. Kennedy’s words when he said, “And so, my fellow Americans, ask not what your country can do for you; ask what you can do for your country.”
From an investing and wealth management perspective, the last few years have been a wild ride. After the financial crisis dip to frightening market lows in March 2009, the stock market mounted a significant rally. Interestingly, the rally seems to have been driven by institutional investors and hedge funds whereas the individual investor, for the most part, stayed on the sidelines thus missing an opportunity to buy stocks. Many investors still retain significant assets in cash today. Where this money moves will affect the future of the market. The recent market correction (defined as a 10% drop from the most recent market peak) was, perhaps, predictable given the rally we observed since last year. With the May 6 “flash crash” serving as a prelude, investor sentiment has again turned negative with a bearish sentiment. If you follow cash flow in and out of the market, you will see investors buying when the market is on the rise and selling when the market is going down, creating a frustrating pattern of buying high and selling low, whereas, everyone knows we should be doing the opposite (buying low and selling high!). Hopefully the proposed resolutions for the European crisis will effectively thwart future problems and we will see a sustained recovery unmarred by the anchors of problems outside of our nation’s control.
The media has dubbed the last 10 years as the “Zero Decade.” This name was earned by the fact that from January 2000 to January 2010, the S&P 500 was down >20%. This is obviously an attention-grabbing headline that sells a lot of magazines and makes for great discussion on CNBC. However, the label may be a bit misleading since 2 major financial crises unfolded during those 10 years (the dotcom bust and the credit market crunch). If either of the financial crises were removed from the return analysis, the numbers look quite different. In the 10-year span of 1995-2005, the S&P 500 rose from 470 in January 1995 to 1181 in January 2005 (151% return!). It is also noteworthy to look at a 15-year return rather than just a 10-year return. In the 15-year span of 1995-2010, the S&P 500 rose from 470 in January 1995 to 1145 in January 2010 (144% return!) even taking into account that both the dotcom bubble and the recent financial industry crisis were included in the time span. This speaks to the importance of a long-term outlook in investing with less emphasis on shorter term trends and crises.
We remain optimistic in our view of the market and our country. I am a great believer in America’s future and feel strongly that by following Dr. Armenti’s principles that America will persevere in the face of any challenge. No one knows for sure where the markets are heading in the near term, but we do know that a professionally managed, well-diversified investment portfolio is your best ally in uncertain times.
Garrett S. Hoge, RFC, CFP®, MS of H Financial Management, is a private wealth manager based in Southpointe serving the ever-changing financial needs of his clients.
Please contact Garrett at H Financial Management, 400 Southpointe Blvd., #420, Canonsburg, PA 15317, Phone: 724-745-9406, Email: garrett@hfinancial.net, or via the Web: www.hfinancialmanagement.com. Securities offered through Triad Advisors, Member FINRA/SIPC. Advisory Services offered through H Financial Management. H Financial Management is not affiliated with Triad Advisors. H Financial Management THURSDAY, JULY 22, 2010 OBSERVER-REPORTER | BUSINESS IN REVIEW