Welcome to “The Week Ahead” where we take a moment to provide our thoughts on what we can expect in markets and the economy during the upcoming week.

The past decade has been extraordinary in terms of economic management and a changing political landscape. Investing amidst the deepest and most virulent recession in memory – a time when capital was scarce and investors were overpaid to take risk – has been rewarding. "Winner take all" has been the best investment strategy, big tech has been the massive winner, and the U.S. has outperformed the rest of the world over the past decade.

The road this decade, however, has been bumpy. It had proven difficult to stick a flag in the ground when markets appeared to be in free fall, when the world appeared to be fraying, and when other investors were running for the hills. We have witnessed investor apprehension and alarm to wait until the world looks a little more stable before committing; the “all clear” if you will. Yet it was amidst the deepest and most virulent recession in memory that we found the most compelling case to invest aggressively – a time when capital was scarce and investors were overpaid to take risk.

Markets are driven by the mentality of the masses, interrupted by the emotion of greed and fear, and designed to advantage those that abstain from foolhardy activity. More bluntly, markets exists to make the greatest number of people wrong most of the time. With the abundance of data that exists in today's environment, the direction of the crowd and its collective views are prominent and widely disseminated through the media. This week investors seemed to believe everything was coming up roses – (Jobs, FED, ECB, UK Election, and Trade Deal) – however, of the now-ten year bull market, investors have sold stocks and put money in just about anything other than U.S. stocks; Bonds (with lower and lower yields), Private Equity (despite lockups and limited price visibility), Cash, Art, and even Bitcoin. The Wall Street Journal reported investors have pulled over $135 billion out of stocks this year despite a strong year of performance. Analysts say the trend highlights investors' apprehension toward a market buffeted by the long-running U.S.-China trade war and lingering worries about a looming recession. Recent market swings on trade-related headlines or weakening economic figures have reinforced this apprehension. Just last week, the market's tranquility was punctured after President Trump signaled tensions with China could stretch well into next year.

No doubt, most investors remember last December as being very volatile and illiquid, with U.S. stocks dropping 16% from its high point. The crowd and thus market perception in late 2018 was that the FED was leaning tighter and would hike interest rates. Not many embraced a Fed pivot that would catalyze a U.S. rally in the first half of 2019, bringing to light the fallacy in the wisdom of the crowd. As we prepare to usher in a new calendar year and a new decade, the lessons of the last decade should remain prominent. Despite roses and blooms this week and the markets seemingly pricing in blue skies with no hint of rain, the risks are far from gone. Our advice heading into the next decade: prepare for rain.

Data deck for December 14–December 20: