Note from the CIO: Ten Years since the Financial Crisis

There are three highlights from the first quarter of 2019 that I would like to share with you.

1. As we discussed last quarter, the value of the largest 500 U.S. companies, tracked by the S&P 500 index, was down 20% on Christmas Eve from its previous high on September 20. The S&P 500 closed the first quarter of 2019 up 21% from the low on December 24. However, because we had a smaller value to grow from, we will need a 25% rise from that low to reach the previous high.
2. Of course, Abacus invests globally and across all the major asset classes of the stock and real estate markets. It was satisfying to see that all of these growth-oriented asset classes delivered impressive returns during the first quarter given that they all struggled in the prior quarter. The returns ranged from 8.7% for small-value companies in the developed international countries to 15.2% for global real estate securities.
3. The final highlight from the quarter was the ten-year anniversary on March 9 of the lowest point in the market during the panic of the Great Financial Crisis. Few would have been bold enough on that dark day to predict that in ten years the S&P 500 companies would quadruple in value! What made this possible?

In terms of the business landscape, corporate profits across the economy have nearly tripled over those ten years. Many of the companies that survived the Crisis have grown and innovated; Apple sold 1.3 billion iPhones these past ten years, and Budweiser and Amazon are now deploying self-driving semi-trucks. And many new companies have thrived during this time such as Uber which released an app on those iPhones that would have previously been considered science fiction.

In terms of the economy, the U.S. has nearly reached energy independence, becoming the largest energy producer in the world while simultaneously reducing our CO2 emissions to their lowest level since 1990. Meanwhile, the unemployment rate which reached as high as 10% in 2009 is now only 3.8%.

While many spend endless amounts of time following the news in Washington, the Federal Reserve or China, at Abacus we know that hard-working people, be they innovative entrepreneurs, inspiring mentors, or tenacious researchers, are what really revolutionize the world. I often tell clients that every 20 years the world becomes unrecognizably better. I might have to change that to every 10 years because clearly these changemakers are as alive and well as ever.

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