Carlin Financial

      The past few years, not to mention the decade, have put investors through a wringer.  No need to rehash all the highs and lows.  In fact, there may be too much attention paid to the highs and lows at the expense of long-term objectives and strategy. 

      Stocks suffered mightily in 2008, so in 2009 investors poured unprecedented sums into bond funds.  Then in response to the big comeback rally, stock fund purchases surged in late 2009 and early 2010.  Investors also have chased gold and oil across their respective peaks and valleys.            

      For those with a longer time horizon, signals from the past decade may be deceiving.  It’s not just that the Standard & Poor’s 500 Index had one of its worst decades ever.  The outperformance by long-term Treasury bonds over stocks was also a record – an 8% annualized spread. 

      Such periods are rare.  A study of 889 monthly rolling 10-year periods from 1935 through 2009 showed Treasury bonds beating the S&P 500 only 14% of the time.  The average for all periods was a 5.3% annualized advantage to the stock side.

      Historical reassurances are fine, but those 300-point down days for the Dow are jarring in real time.  We might take a little more current comfort from stock dividends.  Dividend payouts did fall in 2009, but they’ve been recovering lately.  And analysts have noted the relative strength of corporate balance sheets through the recession.  By the end of 2009 the S&P 500’s dividend yield was approaching the 10-year Treasury bond yield, and 72 stocks in the S&P were sporting dividend yields above that benchmark.

      Last year’s rally was led by the lower dividend payers, which is common in the rebound from a steep market decline.  But over the trailing ten years, stocks that paid higher dividends outperformed.  And advancing the argument for global diversification, many non-U.S. companies pay higher dividends.

      With interest rates at historic lows and most of the world’s central banks still quite accommodative, gold has been hitting new highs.  Gold’s longer record is as an inflation tracker, and the ride can be bumpy.

      To everything there’s a season; it’s just hard to know which comes next.  But it’s always a good time to check and see if we’ve become overweighted to short-term concerns at the expense of broad diversification and long-term objectives.  ■