By William Davis
Not that any of us noticed, but the tape shows that Citigroup stock closed Friday at $62.06 on 13,827,206 shares traded. An unremarkable session, one might say, for the nation’s third-largest bank. Citigroup is, in fact, one of this nation’s “Big Four” banks these days. But we mention Friday’s trading activity not because of Citi’s superb current standing or its cool ticker symbol, but because “C”’s gain for the day — 16 cents — is just about what the stock was worth 10 years ago.
In 2010, the Greek crisis erupted, fear of recession grew in the U.S, the Federal Reserve reintroduced emergency bond-buying, and the dollar tanked. The S&P declined by 17%.
By way of testing reminder, it was Monday, March 9, 2009 when the S&P 500 hit an intraday Financial Crisis low of 666. On the demonic mark, Citigroup was trading as a penny stock, U.S. equities stood where they had been 13 years earlier, General Motors was considering bankruptcy, and even cool-headed investors thought a repeat of the Great Depression was on the way. By all appearance, the U.S. financial system was collapsing. It was, in other words, a perfect time to buy. Doubtlessly, a few so-called contrarians did. At least those who had a few pennies left.
In 2011, the U.S. came close to defaulting on Treasuries and lost its triple-A credit rating. The S&P plummeted 22% between May and October.
The less memorable fact is the stock market had been on an extraordinarily wild ride for months before bottoming out in March. No doubt it looked to contrarians like a really great time to buy when Lehman Brothers collapsed. Or when Congress rejected the TARP bailout. Or when governments and central banks agreed to unprecedented joint action to save the world economy. As it happened, those who thought they timed it perfectly and bought at the Oct. 27 low in 2008 went on to lose 20% by the time the S&P touched bottom four months later.
In 2014, there was an Ebola epidemic and the U.S. bombing of Syria. The VIX index of implied volatility jumped above 30 as stocks fell 10% in 18 trading days.
Sure, there were some intrepid folks on the buy side 10 years ago. And, for the record, the S&P with dividends has produced an annualized return of almost 18% since then. Citi, for the penny-stock chasers, about 21% a year. Great numbers, to be sure. But who among us – even if we had successfully picked the bottom — would have held on for 10 years? Ten, ferociously volatile years of fierce rallies and lose-your-lunch kind of selloffs? In recent memory alone, stocks were knocked down more than 20% from October’s high to December’s intraday bottom. Only to clipped again in February, when volatility pushed prices to a quick 12% plunge from the top.
In 2015, China devalued its currency and an oil-price collapse threatened a wave of U.S. bond defaults. The S&P lost 15% by February 2016.
Truth be known, or at least spoken, timing market lows is more about luck than prescience. So, too, is a calling a market high. It’s been said that if anyone’s held on continuously across the last decade, it’s probably because he or she lost their trading account password. Not an improbable thought. But we’d like to think there are more credible investment strategies.
What the facts are saying…
- All three major U.S. indexes are down at least 1.5% so far this month, off to their worst start to any March since 2009, when the stock market hit its Financial Crisis lows.
- About $10.1 billion flowed out of global equity funds during the week ended March 6, bringing year-to-date outflows to $60 billion. This marks the worst start to a year for net global equity flows since 2008.
- The Dow Jones Transportation Average of truckers, logistics operators, and shipping firms fell for the 10th consecutive session last week, its longest losing streak since February 2009. The recent slump is a warning sign for believers in the so-called Dow Theory who use the gauge as an economic indicator.
- On March 5, 1923, Montana’s Old-Age Pension Law — the first state law to provide retirement pensions – was enacted, setting a key precedent for the creation of Social Security a decade later.
What the numbers are saying…
- $15 billion
The amount investors poured into municipal bond funds in the first eight weeks of the year, the most over that period in at least 13 years.
What the tech guys are saying…
“Big tech is looking far more interesting now than it has any time over the past year. If you can find companies that can grow a heck of a lot faster, they’re looking attractive.”
- Jim Tierney, chief investment officer of U.S. concentrated growth at AllianceBernstein
“Investors should look at Chinese tech stocks, not because they have ‘China’ or ‘tech’ in their names but because they offer long-term upside. Valuations for the group still look reasonable.”
- Bin Shi, head of China equities at UBS Asset Management
“It feels more healthy than the go-go momentum we saw in 2017 and 2018. We’re in a global slow patch, so the earnings growth that growth stocks bring to the table looks more precious.”
- Dave Donabedian, chief investment officer at CIBC Private Wealth Management. “
What folks with an ear to the Street are saying…
“If you take big risks with other people’s money you should have your own fortune at risk too.”
- Heard on the Street columnists Paul J. Davies and Stephen Wilmot
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