Market Insights

As part of a 3-part blog series covering the most memorable changes from the 2010s, our 2^nd post covers the effects of climate change. If you are interested in reading the first part in this Decade in Review series, Central Banks Take the Wheel, please see link below.

Climate Change

In mid-November the city of Venice, Italy experienced its worst flood in over fifty years.  Fueled by rising ocean waters, drudged canals and 75 mile-per-hour winds, the brackish waters of Laguna Veneta rose six feet above normal levels, flooding over 80% of the city.  The flood waters caused an estimated $1.1 billion in damages.  Included in that estimate is considerable damage done to St. Mark’s Cathedral whose crypt flooded for the first time since 1966.

As we approach a new decade, we’d like to take a moment to reflect on some of the most memorable changes from the 2010s. In a 3-part blog series, we will cover central banks, how mobile has changed our world, and the effects of climate change.

Central Banks

Perhaps the biggest change in the financial markets over the past ten years is the evolution of the Federal Reserve from a somewhat autonomous, esoteric monetary policy making body to an almost ubiquitous actor in monetary, economic and political policy. In 2010 Federal Reserve Chairman Ben Bernanke was an anonymous figure, known by few outside financial circles. Today, Chairman Jerome Powell is mentioned weekly in tweets by the President.

On November 13^th the Wall Street Journal published an article entitled “A Socially Responsible Strategy Can Be Tricky” that largely took to task Environmental, Social and Governance (ESG) investing.  Though the author rightly identifies the subjective, and at times confusing, nature of ESG criteria standards (something Dana has previously discussed), the majority of the article is a somewhat cynical view of ESG investing as a worthwhile economic endeavor.

An interesting dichotomy has developed between the collective psychology of investors and market performance.  In a hint of growing uncertainty, investors’ cash allocations have grown $1 trillion over the last three years to levels unseen since 2009. (See chart 1 below). Given the current environment, investor trepidation is understandable.  The U.S. remains in an on-again, off-again trade war with China, economic growth has been lackluster as stagnating manufacturing data continues to wrestle with decent services growth, and impeachment hearings have brought to a boil the nation’s political animus.  Yet, despite the uncertainty, markets averages have soldiered on to new highs.