When you think of a routine, what is the first thing that comes to mind? Some may think, it’s the mundane, the small steps and processes you follow to accomplish all your tasks for the day. But routine is more than that. It’s about forming good habits, feeling prepared. And perhaps the best part of a routine is the comfort that comes from knowing what to expect. For investors, the definition of a good routine would be knowing what to expect from the markets.
Is there such thing as a routine year for markets? Over the last 50 years, the S&P 500 Index grew at an average of about 10% a year, but its return was between 0% and 20% in any single year less than half the time. We haven’t witnessed a price return of 6–11%, a range that might be considered typical for markets, since 1992, over 20 years. And even when there was a year in the routine 10–20% range, there were other things going on in the markets that made the year feel anything but routine. Yields may have been extraordinarily low, or extraordinarily high. Commodities were booming, or collapsing. There really is no such thing as a routine year for markets. However, your financial advisor and LPL Research’s Outlook 2016 can help you prepare for what we may see in the year ahead.
LPL Research expects to see routine year-end outcomes in many areas of the economy and financial markets in 2016, but how we get there may be anything but routine. Certain conditions have been unusual for so long, that 2016 may hold some unexpected turns that could catch some investors unprepared, and it will take a solid investment plan to navigate it.
For some investors, progress toward their financial goals has been hurt by breaking with well-considered investing routines in response to one of the most maligned bull markets in history. LPL Research’s Outlook 2016 will help investors stick to their routines in the face of developments that may seem anything but routine. By maintaining our investment process, we can focus on what matters most to markets, block out shortterm distractions that will quickly fade, and turn a good daily routine into the potential for successful long-term performance.