Morningstar Magazine - October/November 2016 - 27
Dispatches
Global Briefs
TRENDS
Downturns, Recoveries, and Expansions
The U.S. stock market hit new highs over the summer. Will it run out of gas? A lot of things certainly seem to be giving investors
jitters. But some context may be helpful. There have been eight market downturns since 1926, the most severe one being the
Great Depression. More recently, two consecutive downturns with little to no expansion made for a "lost decade." But as we've
n
n n
l
o
o
o l
n
o
is ample potential for future growth, even after recent run-ups.
$
p Recessions (from NBER) p Downturn p Expansion p Recovery
10
146 Mo
697.7% TR
18.6% Annl
44 Mo
193.3% TR
34.1% Annl
67 Mo
85.9% TR
11.7% Annl
16 Mo
50.9% TR
36.2% Annl
35 Mo
21 Mo
24.0% TR
13.1% Annl
6 Mo
-22.3%
151 Mo
9 Mo
21 Mo
-42.6%
51 Mo
63.3% TR
12.2% Annl
18 Mo
21 Mo
19 Mo
-29.3%
5
12 Mo
14.6% TR
14.6% Annl
10 Mo
6 Mo
-21.8%
135 Mo
523.2% TR
17.7% Annl
134 Mo
434.5% TR
16.2% Annl
3 Mo
-29.6%
25 Mo
-44.7%
49 Mo
37 Mo
16 Mo
-50.9%
34 Mo
-83.4%
01/1926
01/1936
01/1946
01/1956
01/1966
01/1976
01/1986
01/1996
01/2006
0.1
Source: Morningstar. Created with S&P 500 month-end total return data.
Be Mindful of Pricey
Low-Volatility Stocks
AMERICAS
United States
For the year-to-date period through July,
the top-ranked equity exchange-traded fund
n n
n o
iShares Edge MSCI
Minimum Volatility USA USMV. The
fund vacuumed up 6.7 billion in net new
n o
l
n
n
months of the year. As more money has piled
in to this fund and others like it, valuations
have richened commensurately. At current
levels, newcomers to the low-volatility party
could be setting themselves up for disappointing
future returns.
E X H I B I T 1 plots trailing-12 on
o n o USMV
on the left-hand vertical axis. As shown,
o
n n ll o
n USMV's
late-2011 inception. More recently, they've
spiked higher. On the right vertical axis is plotted
the ratio of USMV's trailing 12-month P/E
ratio to iShares Core S&P Total US Stock Market's
ITOT trailing 12-month P/E. This is a simple
o l
l .
n
greater than 1 M is relatively richly valued
global.morningstar.com/Morningstarmagazine
27
http://global.morningstar.com/Morningstarmagazine
Table of Contents for the Digital Edition of Morningstar Magazine - October/November 2016
Contents
Morningstar Magazine - October/November 2016 - Cover1
Morningstar Magazine - October/November 2016 - Cover2
Morningstar Magazine - October/November 2016 - 1
Morningstar Magazine - October/November 2016 - 2
Morningstar Magazine - October/November 2016 - Contents
Morningstar Magazine - October/November 2016 - 4
Morningstar Magazine - October/November 2016 - 5
Morningstar Magazine - October/November 2016 - 6
Morningstar Magazine - October/November 2016 - 7
Morningstar Magazine - October/November 2016 - 8
Morningstar Magazine - October/November 2016 - 9
Morningstar Magazine - October/November 2016 - 10
Morningstar Magazine - October/November 2016 - 11
Morningstar Magazine - October/November 2016 - 12
Morningstar Magazine - October/November 2016 - 13
Morningstar Magazine - October/November 2016 - 14
Morningstar Magazine - October/November 2016 - 15
Morningstar Magazine - October/November 2016 - 16
Morningstar Magazine - October/November 2016 - 17
Morningstar Magazine - October/November 2016 - 18
Morningstar Magazine - October/November 2016 - 19
Morningstar Magazine - October/November 2016 - 20
Morningstar Magazine - October/November 2016 - 21
Morningstar Magazine - October/November 2016 - 22
Morningstar Magazine - October/November 2016 - 23
Morningstar Magazine - October/November 2016 - 24
Morningstar Magazine - October/November 2016 - 25
Morningstar Magazine - October/November 2016 - 26
Morningstar Magazine - October/November 2016 - 27
Morningstar Magazine - October/November 2016 - 28
Morningstar Magazine - October/November 2016 - 29
Morningstar Magazine - October/November 2016 - 30
Morningstar Magazine - October/November 2016 - 31
Morningstar Magazine - October/November 2016 - 32
Morningstar Magazine - October/November 2016 - 33
Morningstar Magazine - October/November 2016 - 34
Morningstar Magazine - October/November 2016 - 35
Morningstar Magazine - October/November 2016 - 36
Morningstar Magazine - October/November 2016 - 37
Morningstar Magazine - October/November 2016 - 38
Morningstar Magazine - October/November 2016 - 39
Morningstar Magazine - October/November 2016 - 40
Morningstar Magazine - October/November 2016 - 41
Morningstar Magazine - October/November 2016 - 42
Morningstar Magazine - October/November 2016 - 43
Morningstar Magazine - October/November 2016 - 44
Morningstar Magazine - October/November 2016 - 45
Morningstar Magazine - October/November 2016 - 46
Morningstar Magazine - October/November 2016 - 47
Morningstar Magazine - October/November 2016 - 48
Morningstar Magazine - October/November 2016 - 49
Morningstar Magazine - October/November 2016 - 50
Morningstar Magazine - October/November 2016 - 51
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Morningstar Magazine - October/November 2016 - 53
Morningstar Magazine - October/November 2016 - 54
Morningstar Magazine - October/November 2016 - 55
Morningstar Magazine - October/November 2016 - 56
Morningstar Magazine - October/November 2016 - 57
Morningstar Magazine - October/November 2016 - 58
Morningstar Magazine - October/November 2016 - 59
Morningstar Magazine - October/November 2016 - 60
Morningstar Magazine - October/November 2016 - 61
Morningstar Magazine - October/November 2016 - 62
Morningstar Magazine - October/November 2016 - 63
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Morningstar Magazine - October/November 2016 - 65
Morningstar Magazine - October/November 2016 - 66
Morningstar Magazine - October/November 2016 - 67
Morningstar Magazine - October/November 2016 - 68
Morningstar Magazine - October/November 2016 - 69
Morningstar Magazine - October/November 2016 - 70
Morningstar Magazine - October/November 2016 - 71
Morningstar Magazine - October/November 2016 - 72
Morningstar Magazine - October/November 2016 - 73
Morningstar Magazine - October/November 2016 - 74
Morningstar Magazine - October/November 2016 - 75
Morningstar Magazine - October/November 2016 - 76
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Morningstar Magazine - October/November 2016 - 78
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Morningstar Magazine - October/November 2016 - 86
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Morningstar Magazine - October/November 2016 - 88
Morningstar Magazine - October/November 2016 - 89
Morningstar Magazine - October/November 2016 - 90
Morningstar Magazine - October/November 2016 - 91
Morningstar Magazine - October/November 2016 - 92
Morningstar Magazine - October/November 2016 - 93
Morningstar Magazine - October/November 2016 - 94
Morningstar Magazine - October/November 2016 - 95
Morningstar Magazine - October/November 2016 - 96
Morningstar Magazine - October/November 2016 - Cover3
Morningstar Magazine - October/November 2016 - Cover4
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