Jun 6, 2024 5:54:47 PM / by Jonathan Blau



It seems like only yesterday, early in 1999, when I began my wealth management career at Sanford C. Bernstein & Co., that the Dow reached 10,000.  For days, CNBC highlighted industry professionals donning “Dow 10,000” hats. 

When it comes to providing meaningful insight that investors could use to shape their expectations over the next 20 years, Dow 10,000 was as useful as a top Wall Street analyst – which is to say, as politely as possible -- not very useful at all! 

During the two-decade period ending in 1999, leading up to Dow 10K, the Dow rose from about 850 to 10,000, providing an average annualized return of 13% to investors.  The next 20 years would see the Dow move from10,000 to 23,346 in January 2019, for an average annualized return of under 4.5%.

 There will be nothing unusual, remarkable, or even noteworthy when the Dow likely reaches 80,000 sometime within the next decade.  American investors will wonder in awe, as they do now, about Dow 40,000: “how can we be at 80,000 with the state of American politics, the dollar about to be replaced as the reserve currency, a looming recession, the spiraling US debt level, the threat of an imminent terror attack, and all of the world’s problems?”  “Isn’t the market too high?!”

Such is the immutability of human nature and human nature is always and everywhere a failed investor.



No, it wasn’t!!! 

While this is a popular narrative among investors and the media, nothing could be less true.

For if it were true, how do we reconcile the following outcomes:

  1. The stock market posted an average annualized return of 13% during the 20-year period ending in 1999, when the federal funds rate averaged 7.55%.
  2. The stock market posted an average annualized return of just 4.5% during the 20-year period ending in 2019, when the federal funds rate averaged 1.7%.

As I write this on Sunday, June 2nd, I glance at this week’s Barron’s magazine folded next to my keyboard.  Staring back at me on Barron’s cover page is the tense and sullen glare of Jerome Powell (Federal Reserve Chair) with the bold title “WHY HE WON’T CUT RATES THIS YEAR.”  Among the reasons given is that “a strong economy is getting in the way.” 

In fact, corporate profits hit a new record high of $2.8 trillion coming into 2024, US households are sitting on a record-high $176.7 trillion in assets while consumers’ debt is costing them about 9.9% of their disposable income (close to the lowest levels in 45 years). The US economy grew to a record of approximately $28 trillion in 2023.

Yet almost the entirety of financial journalism over the past 5 months can be condensed into two headlines which have essentially run on alternating days:

  • Stocks rise on hopes for Fed rate cut
  • Stocks fall as rate cut hopes fade

According to financial journalism, the fate of investor portfolios is now entirely hostage to Jerome Powell.  Minor issues such as the ascending trend of corporate earnings, dividends, and stock buybacks for the 500 companies which make up the S & P 500 are, in this view, of limited relevance or even irrelevant. 

In sum, if the Fed seems inclined to favor a rate cut – indicating their belief that the economy is weakening – your stocks will rise in value.  Conversely, if they seem disinclined to lower rates – indicating that they think the economy is doing well – your stock portfolio’s value will decline.  To be clear, the media’s fantasy holds that if the economy is weakening, that will cause your stocks to go up.  If the economy is doing well, your equity portfolio’s value will decline. 

The fact that corporations, US Households, and the US economy are simultaneously wealthier than they have ever been is irrelevant.  The fact that the next “industrial revolution” (Artificial Intelligence) has begun, and that Price Waterhouse Coopers’ research indicates this could add almost $16 trillion to the global economy in 2030 – more than the current economic output of China and India combined, is also irrelevant. One can go on like this.

Let’s mildly hope that the Fed doesn’t find cause to cut rates too much or too soon.  That will signal their belief that the economy remains robust, such that corporate earnings and dividends may continue to scale new heights over time, causing our stock portfolios to do the same!

The current level of interest rates, as all manner of current events, is irrelevant to the goal-focused, plan-driven investor, who must always ask: What in the world will “fill in the blank” have to do with my plan / portfolio 20 years from now, because that and the 10 years on either side of that is the focal point of most plans.  

To wit, as I type, the fed funds rate is near the highest level it has been at in a quarter-century AND THE MARKET IS NEAR ALL-TIME HIGHS!

 In my experience, it has always been how investors respond to any of these events – never the actual events themselves -- that has permanently destroyed wealth.


“The fault, dear Brutus, is not in our stars, but in ourselves.”

                                                             ~William Shakespeare



Electing to reflect whichever fears about whomever wins the upcoming Presidential election, in a way that leads you to change your long-term portfolio composition in response to such fears, has been the only election result that I have ever seen destroy wealth, often irreversibly.

Please stay tuned for a more robust view of the election and its relevance, relating to our investments, in our next quarterly newsletter (early September).

“The investor's chief problem—and even his worst enemy—is likely to be himself.”

~Benjamin Graham



This section is inspired by a client’s question asked during a recent planning review session. 

It is earnings and only earnings that are relevant to long-term stock prices!  The average retirement age in the US is 62 and the joint life expectancy for a retiring couple is 30 years.  Looking at the last 30 years as an example, the S & P 500 has risen from 466 to 5,300, up about 11 times.  Earnings have risen from $22 to this year’s consensus estimate of $245, up about 11 times.  The cash dividend was up about 6 times and inflation is up about 2 times.

Investing in the great companies in America and the world (as an owner -- stockholder, not a loaner – bond holder) did not enable us to keep up with inflation, it allowed us to knock the daylights out of it!




The cyclical (short-term) recovery that began at the end of the 2022 bear market -- S & P 500 at 3,577.03 on October 12, 2022 – is now about 1.5 years old.  Since 1957, these bull markets have lasted about 5 years, on average, and have returned an average of 184%.  So far, at 1.5 years old and having earned 48%, this bull is likely in its early stages. 

The current secular (long-term) bull market, which is the third one in history, began in 2009.  These bull markets typically last about 20 years, so we likely still have 5 more years or so of strong returns before this longest and strongest of secular bulls peters out.

The renowned Dr. Ed Yardeni of Yardeni Research said this week that he expects the strong productivity from last year to continue, primarily due to tech (AI)-led productivity that will increase our standard of living.  Profit margins could climb to between 13%-14% for the S & P 500 (up from its current level of about 11%).  He sees an S & P 500 level of 6,500 as reasonable to expect in 2026.  That would represent an 80% return from the 2022 lows. 

If this bull has an average return of 184%, the S & P would exceed 10,000 – don’t bet on it, don’t bet against it…..just stay on plan knowing that the defining characteristic of the future is uncertainty and we will always be here to ensure that you continue to be able to act rationally when faced with making money decisions under uncertainty.



“It’s tough to make predictions, especially about the future.”

                                                          -Yogi Berra


Wishing everyone a wonderful Summer!




Due to the difficulty of forecasting short-term events, we can’t know the direction, up or down, of the next 20% move in stocks.  But for the multi-decade (even multi-generational) investor, as all who are reading this are, the only important thing to know is that UP has historically been the only direction of the market’s 100% moves. I view the risk of missing any part of the next 100% permanent move up far greater than the risk of catching the next 20% TEMPORARY move down.

Tags: Latest Insights

Written by Jonathan Blau