Every decade of investing brings its own distinct challenges and opportunities. Nonetheless, the saying “history never repeats itself, but it always rhymes” is often a popular lens through which to view and explain markets overall, but recent history calls into question the reliability of that notion. The last four decades have been shaped by vastly different macroeconomic environments, policy responses, and technological shifts. In our view, we are currently living through one of the most unusual—and arguably one of the most resilient—periods in modern history.

The 1990s began with a recession that weighed on stock market returns for the first half of that decade. However, the second half was defined by a powerful economic recovery and rapid technological advancement, specifically the rise of the internet. This was a transformational period for the economy and the markets, marked by strong corporate earnings growth and a broadening investor base. U.S. households significantly increased their equity exposure during this period, going from about 13% of household assets in 1990, to about 33% by the end of the decade.¹

Unfortunately, this increase in risk exposure coincided with the arrival of what then became one of the most disappointing periods in modern investing. The 2000s—often referred to as the “Lost Decade”—were plagued by a series of major market disruptions. The dot-com bubble burst in 2000, leading to a sharp decline and revaluation of technology stocks as well as broader equity markets, followed by a long climb back up. Just as markets fully recovered, the Global Financial Crisis of 2008-2009 delivered a profound shock to the financial system and severe recession, resulting in significant losses for most asset classes. Over the full decade, the S&P 500 delivered a negative return of over 14%.

In stark contrast, the 2010s were defined by slow but steady economic recovery, low inflation, and unprecedented monetary accommodation. Despite sluggish GDP growth and persistently low interest rates, the decade saw one of the most prolonged bull markets in U.S. history. The S&P 500 rose in nine out of those ten years, propelled by expanding profit margins, record-low borrowing costs, and a wave of innovation—especially in technology where several large companies became historically dominant. While some questioned the sustainability of the rally, it proved remarkably durable.

Now, in the 2020s, we are navigating yet another dramatically different investment landscape—one that has already included a global pandemic, war in Europe, extreme fiscal and monetary interventions, and a shifting geopolitical environment. Inflation has returned as a key variable for the first time in decades, interest rates have risen sharply, and supply chains are being restructured in real time. Yet, through it all, corporate earnings have remained resilient, labor markets have held strong, and equity markets have rebounded from each major shock faster than many expected.

While the resilient nature of this decade may feel like it is unsustainable at times, it is important to recognize that we are also living through an extraordinary wave of technological change that has the potential to meaningfully impact productivity, corporate profitability, and our daily lives. This is similar to the 1990s, when the widespread adoption of personal computers, the internet, enterprise software, and mobile communication ushered in another era of structural change in the economy. Back then, productivity surged as digital tools fundamentally changed how we worked, how we communicated, and how we consumed information and entertainment.

This time around, though, the acceleration in technological adoption was driven by the pandemic. What began as a temporary solution quickly became a permanent shift, as companies and employees rapidly adopted cloud computing, video conferencing, and remote working. For better or worse, this has allowed knowledge-based work to happen from anywhere and at any time. Even though many employers have worried that remote work would limit productivity, measurements from the Bureau of Labor Statistics show that productivity jumped significantly in 2020 and is now about 10% higher than it was before the pandemic. While workers have championed this as a boon to work/life balance, the numbers suggest that people have either become much more efficient with their time, or may simply be working more as the lines between personal and professional lives blur. Regardless of the cause, this increase in productivity has provided an important cushion for the economy and helps explain its resilience in the face of repeated shocks.

Looking ahead, the next leg of potential productivity gains could be even more powerful. The integration of artificial intelligence into a broader range of business functions—such as customer service, product development, content creation, and data analysis—promises to further enhance efficiencies and accelerate innovation. Rather than replacing humans outright, early implementations of AI appear to be complementing knowledge workers by eliminating repetitive tasks and enabling faster, more informed decision making.

As adoption widens, these tools could increase individual output while also reducing operational costs for companies, potentially lifting profit margins across sectors. Just as previous technological revolutions redefined the economic landscape, the current wave of innovation may eventually result in sustained economic and corporate earnings growth. Furthermore, gains in productivity are deflationary and this could allow for a return to a lower interest rate environment. Like many transitions, this one is bound to be disruptive and sure to require adjustments, but the result should deliver lasting benefits.

Of course, even in the context of a historically resilient economy, a high level of uncertainty remains. With a steady drumbeat of headline-driven news, it can be difficult to step back and fully appreciate the positive structural developments unfolding beneath the surface—many of which are likely to persist regardless of political agendas or near-term disruptions.

At the same time, we acknowledge that market volatility is likely to remain a feature of the investment landscape. Whether or not history truly rhymes, one constant is that volatility often creates compelling opportunities for disciplined investors. With this in mind, we’ve been active in rebalancing portfolios throughout this year, taking advantage of market pullbacks to add to equity positions and then reducing exposure as markets have recovered. This approach has been a hallmark of Sand Hill’s investment strategy over time and has served our clients well. If you would like to discuss our outlook in more detail, please reach out to your Wealth Manager.

1 – Federal Reserve Bank of New York