Auour Insights

In their book The Fourth Turning, William Strauss and Neil Howe argue that American history has moved in cycles that last roughly as long as a human lifetime, within which are four distinct two-decade eras, or turnings. They say that although we think our time is unique, the way people feel today—or at any time—echo the feelings and attitudes and behaviors of past times. Mark Twain’s quote “History doesn’t repeat itself, but it often rhymes,” is a good summation.

These four turnings are like seasons. The first is spring, the birth of a new order, followed by

October was quite a month for world markets, with many hoping November would be different. Though investors left the trough quickly for the second time this year, October’s losses felt different than February’s. February’s seemed merely ‘technical.’ October’s seemed more fundamental. The immediate context for February’s market losses were 13 months of positive returns, an optimism that the world economy was in a synchronized growth profile, and the reassuring sense that the impact of the new U.S. tax laws were still ahead of us.

The October selloff was different: World economies outside the U.S. are experiencing a material slowdown. China is

“The economic problem is that the material fruits of the United States’ engagement with China (and the post-1980 globalization more generally) have been very unevenly distributed…”

—Arthur Kroeber, Gavekal

The Quarter in Review

It was not a bad quarter! U.S. equity markets were very strong across all styles and sizes. We moved past the impact of February’s dive in this quarter, and although you can point to different reasons to justify calling it strong, clearly the economy was the primary factor, with the U.S. continuing to buck the trend of slowing growth in international markets.

On that note, the international economy has been missing

The Oracle of Omaha, Warren Buffett, is a consistent optimist about the power of investing in the U.S. equity market. Though known as a selective investor, he advocates that the average investor buy and hold a slice of the entire equity market. As a fundamental principle, we agree. But for those of us who aren’t in his unique position as one of the richest people on the planet, sometimes we need access to that slice.

As the graphs below show, Buffett is right over the long-term. There are few periods when equities did not produce superior returns on an annualized basis

Danny Deutsch’s motto and the title of his book, Often Wrong, Never in Doubt, are about the power of confidence and moving forward even when it results in as many misses as hits. It worked for him. It doesn’t work in investing, which relies on empirical evidence, not hope. However, we find the motto does apply to the alternative investing space—given its poor performance coupled with confident messaging.

The size of this space is more than $6 trillion and encompasses real estate (for investment purposes), private equity, and hedge funds, as well as other, more esoteric forms