One of the early lessons in my career is that the financial markets will humble you. We've enjoyed a long stretch of positive returns since the global financial crisis, so we have to be ready to navigate some rough waters ahead. (Pardon the nautical reference, but it comes with serving on HMS Vanguard for two-plus decades.) We can't be lulled into complacency by the low volatility and generous performance across asset classes. I can assure you: This is not "the new normal."
With asset classes fully priced, we should also be prepared for a lower return environment. In such an environment, it is critical that clients keep their costs low and stay disciplined. When returns are low, it is always tempting to chase the promise of return from some new approach. All too often these approaches are a fool's errand. It is far better to stick with what the markets give you and minimize costs and taxes. Fortunately, Vanguard is better equipped than ever to encourage disciplined investing with our direct investors, to reinforce the right behavior with 401(k) participants, and to help our advisors keep their clients on track.
Outgoing Vanguard CEO Bill McNabb seems to be going out on top. Not necessarily at the top, but perhaps fairly close to it? Buckley, who takes over next year, is coming in at a decidedly different moment than when his predecessor took the reins in 2009.