One the asset managers we use recently released his market commentary. His name is Geremy van Arkel, and he’s a Chartered Financial Analyst with Frontier Asset Management. He states in his writing, “There are so many similarities between what is happening now and what took place in 1999 that is uncanny.”
Geremy continued, “First off, 1999 occurred following a long and extended bull market. Ten years into that bull market, the obvious leaders of the day were known, and investors couldn’t get enough of them. This created a very narrow investment market environment – much like that of today with FAANGM (Facebook, Apple, Amazon, Netflix, Google, and Microsoft).”
He goes on to explain that those six stocks comprise an overweighting in the NASDAQ and S&P. He states, in theory, one would only need to invest in those six stocks to continue making return, but that’s not rational or prudent. He analogizes that the same thing was happening in 1999 with technology stocks.
Later in Geremy’s commentary he gives 10 reasons why today’s current stock market is eerily similar to 1999. If you’d like to read his commentary send us an email at connect@clientsexcel.com, and we’ll forward it to you.
He concludes by staying, “How does this all end, and what, if anything, should we do about it? Are these the signs of a stable and efficient market environment? I will let you decide. What I personally learned in 1999 is that there is no way to win in a bubble. I find it best to simply not participate. That way, I can sit back, watch, and just enjoy the show. The second thing that I learned is that there is a difference between an investment and a speculation. Here is the rule to live by, so ears up. An investment is an asset that you can hold forever. If investors only chose investments in light of the idea that they could never sell them, they would make much better decisions. A speculation, on the other hand, is when investments are chosen with the idea and intent that they will be sold at a higher price.”
We use asset managers whose philosophy resonates with ours. At Geremy’s firm they are forward looking. Many people will talk about past performance in relation to the market, but what that fails to communicate is that the future will be vastly different than the past.
It’s important when position your portfolio to have someone who’s anticipating the future rather than someone who is looking to the past for what may happen in the future. Change happens fast. Is your portfolio geared for rapid changes?
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