Believe It or Not — Stellar 2019 Ends Second-Worst Double Decade in History

Street Sign of Worst and Best | Double Decade Stock Market | Sheaff Brock

Believe It or Not — Stellar 2019 Ends Second-Worst Double Decade in History

“For investors, the past decade was a marvelous run, but that tells only half the story,” Ben Carlson writes in Fortune. Not only were the 2010s the first decade since 1850 that the U.S. did not experience a single recession, the stock market has hit more than 200 new all-time highs on the S&P this decade alone.

Sheaff Brock | Stock Market Total Return by Decade

A chapter in Chip and Dan Heath’s book, The Power of Moments, offers a valuable perspective. Research has found, the authors note, that “when people assess an experience, they tend to forget or ignore its length. “This phenomenon is called ‘duration neglect.’” People tend to rate an experience based on two key factors: the best or worst moment and the ending.

The duration effect certainly applies to our perceptions of the stock market. The “ending,” or most recent investment experience, we’ve had has been almost extraordinarily positive, but it would be a duration neglect mistake of the first order, Sheaff Brock Managing Director Dave Gilreath stresses, to make investment decisions based on our recall of that “best point” alone.

Stock market results in the decade before this one, Gilreath reminds us, were so terrible that the combined 20-year period has been the second worst double decade in history! (By way of reminder, from 2001-2010, we lived through two recessions and two enormous stock market crashes.)

Sheaff Brock | Stock Market Two-Decade Total Return

But, just as detrimental as focusing only on our “best” moment, it would be a duration mistake to focus on that “worst moment” decade, allowing fear to paralyze judgments going forward.

At Sheaff Brock, Gilreath asserts, the thinking is that a really good twenty-year period will serve as a “natural” follow-up to the truly poor double decade just ended.

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