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A Tale of Two Quarters … and the 160 Prior

Adam Hoffmann – Carlson Capital Management
Adam Hoffmann, CFP®, AIF®

Chief Investment Officer
507.321.4004
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  Being able to apply my deep-rooted curiosity in a way that allows our clients to focus on what they truly enjoy doing the most, rather than having to worry about their financial well-being, is a wonderful thing.  

Professional Biography
Adam Hoffmann is a member of the firm's Management Team and serves as Chief Investment Officer at Carlson Capital Management. In this role, he leads the firm’s investment team in the areas of trading, investment research, portfolio design and technology support for investment applications. Adam oversees analysis and execution of investment strategies for new and existing client portfolios. He consistently communicates the firm’s investment philosophy and approach by writing for firm publications, presenting to new clients, and by participating in client meetings. Adam chairs the CCM investment committee, represents the firm with strategic partnerships in the investment community, and serves as the firm’s liaison to the Zero Alpha Group investment committee. Adam holds the Certified Financial Planner™ designation granted through the Certified Financial Planner Board of Standards and has served as a subject matter expert for the CFP Board, contributing to the development of examination questions for the CFP Certification Examination. He has also served as a presenter at industry events, providing other financial services professionals with continuing education credits in investment topics. In addition, Adam holds the Accredited Investment Fiduciary professional designation, awarded by the Center for Fiduciary Studies. The AIF designation affirms the highest in fiduciary standards of care for CCM clients.

Adam graduated cum laude with Honors Program distinction from Augsburg College, where he earned a Bachelors of Arts degree in Finance with a minor in Business Administration. While at Augsburg, Adam participated in four years of varsity football and was honored by his teammates by being elected captain for both his junior and senior seasons. He also earned all-MIAC and pre-season All-American honors.

Adam is a former member of the board of directors for the Just Food Community Co-op and past trustee for the First United Church of Christ Northfield. He and his wife Rachel grew up in Hastings, Minnesota and now live in Northfield with their two daughters.

Personal Thoughts
A strong sense of curiosity is a cornerstone to who I am and how I live my life. As a kid I used to be fascinated by how things work or why things happen the way they do. I often would take things apart to see what was happening ‘inside,’ frequently with limited success at being able to put them back together. Little has changed since then with regard to my curiosity, but fortunately my success rate of being able to put the pieces back together has greatly improved. I have always been driven by this desire to solve problems and learn more about the world around me.

There is a natural connection between this curiosity and managing portfolios. The investment world today is one of relentless change and evolution. With advances in technology, there is an endless stream of news available at our fingertips that constantly impacts asset prices, shapes investor behavior, and provides an unlimited supply of data and information to digest.

It is our job at CCM to absorb this information and provide guidance and knowledge back to our clients about what it all means and how it may it impact the world we know. The most important role we play in our clients’ financial lives is not only to understand the big picture – that is the Market and the global economic system – but to be able to translate how events and changes around the globe impact each individual client and their personal financial plan.

Being able to apply my deep-rooted curiosity in a way that allows our clients to focus on what they truly enjoy doing the most, rather than having to worry about their financial well-being, is a wonderful thing.

Adam and other members of the CCM Investment Team regularly post articles of interest including investment insights, recommended reading on timely topics, and articles on portfolio management which you can find here.

Adam Hoffmann
Adam Hoffmann, CFP®, AIF®
Chief Investment Officer

As the chart below shows, 2020’s second-quarter rise in equity market performance was as dramatic as the previous quarter’s decline. With plenty of bumps along the way, the S&P 500 is now up more than 40% from the bottom on March 23. 1  If we view these recent extreme market events as isolated time periods, we can see the sharp contrast between the first two quarters of 2020 (Chart 1, below). These quarters were truly “tail events.” Q1 produced the fifth worst return, and Q2 produced the fourth best return of calendar quarters over the past 80 years. 2  This likely isn’t surprising given the unprecedented events we’re experiencing in the world today.

The Bigger Picture

When we step back and isolate these points in time, it underscores why it was such an uneasy experience for investors. It’s natural and helpful to look at stock market return data within the confines of specific time periods, whether it’s calendar months, quarters, or years. That data helps us see time-specific market realities, while also giving us the ability to view the bigger picture and getting us beyond the noise of daily movements. It’s important to remember that even an annual return is just one number and doesn’t capture the breadth of experiences and emotions that the year contained. A number alone cannot convey how the actual volatility “felt” at the time.

When we extend this kind of data out over a 40-year-time-period we gain additional critical context. The chart below illustrates calendar year returns and intra-year declines for the S&P 500 since 1980. By just looking at the individual years, it’s hard to see the compounding growth that investing in stocks has provided. Each dollar invested at the beginning of 1980 is worth more than $84 at the end of June 2020. 3  That sounds great, but it wasn’t always easy to weather the storms along the way. Looking more narrowly at the calendar year bars, 30 out of the 40 years ended up providing positive returns—that is, 75% of the time, investors were rewarded for being in the markets. Interestingly, however, in this same period, almost 75% of the time, markets were down 10% or greater from the highs of the specific year, and, in fact, 40% of the time they were down 15% or greater. Certainly, these kinds of roller-coaster experiences are more common than we might recall.

Data represents past performance. Past performance is no guarantee of future results. Chart is for illustrative purposes only. Returns are based on data from the S&P 500 TR, for the time period of January 1, 2020–June 30, 2020. Source: Dimensional Fund Advisors.

Lessons From Equity Market Performance

When you note 2020’s combination of unremarkable year-to-date returns, and extreme intra-year loss, you’ll observe that there are other years with similar market experiences. Like this year, these other periods represent extreme and unprecedented events such as wars, global credit crises, 9/11, the tech bubble bursting, the crash of 1987, the global financial crisis, and many more. Hopefully, these illustrations underscore some key points as we continue to navigate a global pandemic. Many things in our lives and society feel, and remain, uncertain.

When it comes to equity markets, we are reminded by looking at historic performance that, 1) Markets can change rapidly and dramatically—volatility is, has been, and always will be part of the experience, 2) Higher returns have historically been the reward for accepting risk and volatility, and 3) 40 years of market history underscores what has been magnified by our experience during the pandemic—you simply can’t time the markets. Where these snapshots in time are perhaps most beneficial, is to reinforce how to behave in the future—with patience and discipline.

Data represents past performance. Past performance is no guarantee of future results. Chart is for illustrative purposes only. Returns are based on data from the S&P 500 PR for the time period of January 1, 1980–July 8, 2020. Source: JP Morgan, Guide to the Markets.


  1. Morningstar, S&P 500 TR for the time period of March 23-July 8, 2020
  2. Dimensional Fund Advisors, S&P 500 TR
  3. S&P 500 TR for the time period of January 1, 1980-June 30, 2020

The information above does not represent a recommendation of any particular security, strategy or investment product. The opinion of the author is subject to change without notice. Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed. This article is distributed for educational purposes and should not be considered investment advice or an offer of any security for sale. Past performance is not indicative of future results and no representation is made that the stated results will be replicated.

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Published July 24, 2020 Topics: Dimensional Fund Advisors, Discipline, Investment Insight, Market Conditions, Market Volatility

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