I love the Rolling Stones!
The first Rolling Stones concert I saw was 30 years ago. At that time, I remember thinking, Wow, these guys really rock. And they are kind of old. At the time, they were in their 40s.
Since then, I have tried to see the Stones whenever they are on tour. Each time, I think it must be their last tour. They are in their 70s now. But, last year, they surprised me yet again, going out on another tour.
When I think about the economic recovery that we have been having since 2009 — the longest on record — it reminds me of the Rolling Stones. Just when you think it must be done, it rallies for another tour. In short, we are in a Rolling Stones recovery.
This has also been the slowest economic recovery, likely continuing through 2020 at a slow pace of growth. In fact, “longer and slower” will likely be the economic pace for the next decade. Demographics and a shift from a manufacturing economy to a service economy play roles in this change. This shallow growth path will likely have less volatility than previous decades.
The Rolling Stones and Demographics
The Rolling Stones are a good metaphor for global demographics, too. People are living and working longer. Global life expectancy continues to increase at the same time birth rates are dropping. The result is an older average population. As people age, they tend to consume less and that results in slower global economic growth.
Manufacturing to Service
Over the last several decades, we have steadily moved away from manufacturing to a service economy. Services are less cyclical than the manufacturing economies. Let’s take music, for example.
I have an original edition Sticky Fingers album with the zipper in the middle of the album jacket. It’s really cool, and I like having it. However, I don’t buy vinyl records anymore. I don’t buy CDs, either. I stream music. Streaming is a service; nothing is manufactured. I pay Apple a monthly fee to stream music. That is a very consistent recurring revenue for Apple making their revenue less volatile. That is how service economies operate. They have fewer ups and downs. This is another contributor to our ability to sustain such a long, albeit, slower economic growth.
Finally, who hasn’t been asked the question: Beatles or the Rolling Stones? Let’s go back to 1970. The Beatles had just released Let it Be and the Stones Let it Bleed. Back then if I asked you which band would still be together and touring 40 years later, the smart money would have been on The Beatles. We can never be sure how the future is going to unfold and that is why we diversify. The only logical answer to the Beatles or the Stones is BOTH.
The last decade has been the decade for US Large stocks. Some may be tempted to think that this will persist forever. So, why not have an S&P 500-only portfolio? We need to have the humility to know that no one can accurately predict the future. Just like the smart money was on the Beatles to still be around in 1970, we believe diversification is always the smarter choice.
The Rolling Stones Recovery
Financial goals can still be achieved in a Rolling Stones recovery. While the growth may be slower, inflation and interest rates should also be lower. Economic volatility should be subdued. The negatives are balanced out by some positives. We are positioning our portfolios to rock on in a Rolling Stones recovery.
We wish you a happy and healthy new decade.
Please contact your Wealth Advisor or me with any questions or concerns.
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