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Some Amazing Statistics from JP Morgan Market Insights

I was sitting through a presentation the other week and the speaker kept showing graphs/charts from J.P. Morgan’s Guide to the Market for the 2nd Quarter 2017.  I couldn’t believe some of the information he was sharing, I knew immediately that I had to take a look at the full report.

Charts and Graphs from J.P. Morgan’s Guide to the Market

There is a lot more information than the selected charts below, however, these are the most interesting to me.   I was going to try and group them together to make a cohesive story line, but that would be a tremendous amount of work and felt too much like shoving these charts into a single category when they cross a few categories.  So I figured I would just share the slide and a sentence or two on what immediately came to my mind.

For the most part we, as humans, are awful at investing:

20 year annualied return by asset classI wanted to share this graph first, because it was the inspiration for me to actually take a look at the presentation. The average investor is absolutely terrible at, well, investing! There are two take-aways without even looking up the underlying study/report that gave way to the information:

  1. If you, as an investor, bought almost anything and didn’t try to mess with it you’ll do better than trying to beat the system; and
  2. Fees have to take a huge bite out of the average investor’s return

How does time and diversification affects volatility of returnsBuilding on the theme that the average investor is terrible at what they do, you can simply just set it and forget it and almost know with certainty that if you ignore your investment long enough it’ll be worth more at a later date.  Moving your holding time frame from 1 year to 5 year reduces a 100% equity portfolio from a possible -39% (since this is 1950 to 2016 my guess is that this one year bomb is 2008) to drop to a -3% cumulatively over those 5 years.

Even more interesting (at least to me) is that there are almost no negative 10 year rolling periods for a pure stock portfolio since 1950, and no negative rolling periods for a 50-50 portfolio during that same period.

Annual Returns compared to intra year lows I couldn’t believe this chart comparing the low point of the year with the calendar year finish.  It looks like 2009 if you sold at the low of -28% you missed the ride all the way back and then to a positive 23% for the year! Right here is why people are terrible investors!  Shit hits the fan and you bail when 

Performance by asset class for past 15 years

I have shared a similar chart before on this site, but it is always amazing to me to see how the various asset classes jump around year to year  It is rare to see a top performing asset class win the top title back to back years.

S&P500 growth compared to volatility eventsThere is always something happening in the world and yet we keep on spinning  Those downward drops probably seemed like massive, monumental events that are completely muted as we go on.

Consumer debt service ratio past 25 yearsThis slide provided me with 2 immediate thoughts:

  1. Consumers have been in a worse situation with regard to personal finances.  Look at the debt payments back in the 200s! We are at a fraction of that
  2. It feels like the household net worth should be higher

Income by education and degree

I know that this is obvious but holy shit, is education important! To see it quantified is pretty crazy.

Consumer confidence compared to stock market return

I thought it was interesting to see just how little correlation there is (or possible inverse correlation) between consumer sentiment and actual market returns.  The problem would be calling the top or bottom, or alternatively, the lesson would be just ignore the noise.

Capital appreciate vs dividends based on average returnsWow, look at those steady dividends gains.  Can they compete with huge capital appreciation pops? Absolutely not, but it is nice to seem them decade in and decade out.

Historic returns on cash accounts

Kinda crazy to think that cash wasn’t always a dead asset!



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