You Never Know

Written by Chuck Carroll, TFO Family Officer Partners Chief Investment Officer

The holiday season is officially upon us, and with it comes our annual opportunity to gather with family and friends and share joy with those we love. If you’re anything like me, those family gatherings also provide a great opportunity to smile and raise a glass to fond memories and funny stories about loved ones who are no longer with us.

One of my most vivid memories of my late father was his passion for photography. A number-crunching, business-advising Certified Public Accountant by day, on the weekends (at least those he wasn’t working) he was passionate about all things photographic. During my youth–the late 1970s and 1980s– technology hadn’t yet blessed photographers with the digitalization and miniaturization that we take for granted in today’s mobile phones and digital cameras. As a result, serious photo hobbyists could easily acquire a closet full of camera bodies, various-sized lenses, light meters, and other related paraphernalia. When we traveled on family vacations, my father would pack a separate carry-on bag (think extra-large padded duffel bag) of camera gear, which never left his side. To this day, my mom just shakes her head and sighs when she describes us weaving through a crowded airport, she, my sister, and I carrying the bulk of our family luggage because no one other than Dad was allowed to handle “the bag.”

When I would ask him (as I think I did on every trip) why just one camera and one lens wasn’t enough, his response was always the same: “You never know.” I’ve since come to appreciate that phrase, because the photos in our digital frame that we cherish the most aren’t the meticulously posed, digitally enhanced images of family photo shoots. While we appreciate those, the photos that really make us smile are the candid snapshots taken in the waves, at a sporting event, or just doing something silly in our own backyard. The wonderful images that only exist because the person taking the picture had the foresight to think, “you never know.”

In the financial markets, the month of November was analogous to one of those memorable candid snapshots. November didn’t provide any dramatic newsworthy events to anchor in our memory: No great advance in treating a life-threatening human condition, no peaceful ending to a worrisome military conflict, no global economic boom. In fact, earlier this Fall many market pundits had been downright pessimistic about the impact that lingering inflation, falling commercial real estate prices and a host of other concerns might have on the global stock market.

But yet, in the face of that pessimism and without an obvious catalyst, the global stock market turned in one of its most impressive months in history. The 9.3% return achieved by the market in November was the best monthly return since 2020¹ and ranked in the top 3% of the 1,175 months of market history going back to 1926¹.

What was more surprising to many investors in the month of November was that the US bond market gave us a surprise that one-upped the stock markets. At the end of October, the US bond market had suffered through its worst three-year period history, falling over 15% during that time¹. But investors betting on a continued decline in bond prices were surprised to see the bond market quickly reverse and post a 4.6% return in November, its best month since “Back to the Future” hit the theaters and “The Cosby Show” ruled the TV ratings¹. In fact, November’s bond market performance was the 8th best monthly return in the past 1,175 months¹.

While some pessimists might try to downplay November’s returns as just a meaningless one-month blip in a downward trend, the long-term impact on an investor who chose to be out of the market, and thus missed the significant one-month returns described above, could be quite dramatic. For example, a hypothetical investor who chose the comfort of their savings account over a 60/40 portfolio of stock and bonds didn’t just miss out on the unusually strong returns that the market provided in November. The opportunity cost of missing just those 31 days, when compounded over a multi-year or multi-decade time horizon, could potentially double or triple the initial amount.

Any great photographer knows that being prepared for life’s unpredictability can help to capture once-in-a-generation moments.  Staying fully invested in markets, even when recent results have been disappointing and the news seems bleak, can do the same thing for your wealth. After all, you never know.