Year and decade financial review: Part 3

The best market predictions are based on probabilities calculated from past performance

The last two columns reviewed Canadian and U.S. decade-long economic and investment performance. Successful investing takes a long-term approach; understanding the underlying reasons for the macro picture is important.

Let’s look more short-term. What happened last year, how did our portfolios perform, and what is likely to happen in 2020?

I concluded my 2018-19 New Year’s newsletter issue with one of my favourite Winston Churchill quips, “When you’re going through hell, keep going!” I was trying to motivate my subscriber base to stay the course after what was a tough 2018.

The year began with weak investor sentiment, many prognosticators predicting a recession in 2019 and another down-market year. I took a much more bullish stance. My first prediction is always that most predictions will be wrong. In addition, I predicted the S&P 500 to be up in excess of 12.5 per cent and the Canadian market to beat the U.S.

The U.S. market ended 2019 with a total return of 31.5 per cent, shocking most market participants.

The TSX returned 22.9 percent, making my “beat the U.S.” prediction wrong, but a good kinda wrong. The TSX had its best year in the decade. For a fourth year in a row my predictions were significantly better than most experts.

How is it possible that an amateur investor and seed salesman can beat the pros?

Firstly, I think it is because I use data rather than current market conditions as my guidepost. The markets have seen everything, so evaluating how they reacted in the past produces predictions based on probabilities.

Secondly, I don’t succumb to current market sentiment, but use market sentiment as a contra-indicator.

Thirdly, I don’t take the process too seriously because if no one else can correctly and regularly predict market swings despite many claims of clairvoyance, what makes me think I can? Short-term markets will always be unpredictable.

What matters is how our portfolios perform. In 2019 our RRSPs and TFSAs ranged from 12.0 to 24.9 per cent, less than market benchmarks, but respectable. I tend to do comparatively better during tougher market conditions.

My non-registered account set up for newsletter purposes came in with an almost unbelievable gain of 41.4 percent.

The Titanium Strength Portfolio 19.6 in 2019 and 20.4 per cent since I started the model for Grainews readers a year-and-a-half ago. Every stock is now in the green. How did your portfolios perform?

What does 2020 have in store? Please keep in mind I am writing well before you are reading it.

The pros in the U.S. have a median growth target of 6.5 per cent. My call is once again on the wild side, predicting over 12.5 per cent. The median TSX expectation is just 3.5 per cent, with the most bullish pro equal to my prediction, for a gain of 17 per cent and hit 20,000.

Why was I way more bullish last year and again this year, than virtu- ally everyone? A few years ago, I looked back at U.S. market data of what happened after a flat year, which I defined as plus or minus five per cent. This occurred in 2015 and was the basis of my market calls for 2016 and 2017. It occurred again in 2018 and was the basis for my 2019 and 2020 predictions. There were 12 such occurrences between 1925 and 2018. In 11 of the 12 occurrences, the market was up dramatically with the only exception being at the onset of the Second World War. The average gain was 22.9 per cent.

The second year after a flat year was also very strong with 10 positive years and only two negative ones, one being during the Second World War. The average gain the second year after a flat year was 17.7 per cent. Those are consistent market history results creating excellent probabilities.

Will history repeat in 2020? Please review my first prediction, but I would much sooner be on the right side of market history than the wrong side.

About the author


During a 35+ year career in ag sales and management, Herman VanGenderen became an active investor and stock and real estate, building portfolios in both. His latest book is “Stocks for Fun and Profit: Adventures of an Amateur Investor.” Visit his website at or email Herman at [email protected]



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