Key Points Challenges include elevated virus transmissions, high unemployment levels, the Presidential election and stretched valuation metrics Monetary and fiscal policy combined with vaccine developments are likely to continue to support risk assets 2020: A Historic Year 2020 will be remembered as the year the coronavirus severely tested the basic freedoms and tenets of capitalism in the United States. The virus has proven to be highly efficient in disrupting many of the daily routines we typically take for granted. Like an engine needs clean oil to operate smoothly, the free movement of people, goods, and capital are key lubricants capitalism needs to operate smoothly. The virus is near-perfect friction to this free movement. As we have witnessed, businesses and education systems have difficulty functioning without free movement. Unfortunately, we have also felt the human tragedy the virus has created with nearly 775,000 deaths globally,5 a number that will sadly go higher. For investors, the result has been some of the largest and fastest swings in financial markets and economic conditions in history. Yet given all this bad news and volatility, the resiliency of our people and the capitalistic economy is truly amazing. In short order, doctors and scientists have developed 8 coronavirus vaccines that are in late-stage trials,1 and many new treatments for COVID-19 are being uncovered rapidly. Central banks and governments globally have also delivered unprecedented reli
by Jim Lineweaver, CFP®, AIF® There’s an old saying you’ve probably heard that says “Sell in May and Go Away.” But is that good advice? What’s the best thing for you and your investments over the historically slower summer months? The phrase “sell in May and go away” is thought to originate from an old English saying, and it turns out it did have some validity, at least from 1950 to around 2013. During that time, the Dow had an average return of only 0.3% during the May to October period, according to Forbes. But, since 2013 there’s good reason to believe that’s no longer the case. For example, the S&P 500 rose nearly 7% from the beginning of May 2017 through the end of October, according to YCharts. The blue-chip index was up 5% during May through October of 2016 as well. Another common myth is the October Effect, which is the perception that stocks tend to decline during the month of October. Most statistics go against the theory. Some investors may be nervous during October because the dates of some large historical market crashes occurred during this month. But fortunately, this seeming concentration of days is not statistically significant. From a historical perspective, October has marked the end of more bear markets than it has acted as the beginning. We try to help all of our clients keep these things in mind when making decisions, and don’t let these myths cloud their judgment.
By Chad Roope CFA®, Lead Portfolio Manager - Fundamentum The recent equity market correction has no doubt been uncomfortable. As of the end of year close, the S&P 500 ended the year to date down 6.24%. Concerns about slowing global economic growth, worries that the Federal Reserve is pushing interest rates too far too quickly, fears around the US/China trade war and uncertainties about a US Government shut down have all combined to create downside volatility that we’ve not experienced in a few years. While we agree this is all concerning and that we are likely to continue to see more volatility in the shorter-run, we do not see an economic recession in 2019 based on the data we see today. US corporate earnings growth is likely to be reasonably strong in the first half of 2019, manufacturing data remains in expansionary readings in the US, US unemployment continues to be at historically low levels, and consumer confidence remains relatively high as well. Those are all good signs as well as the fact that many companies are flush with cash, and the recent tax package gives incentives for them to invest this cash in the economy. When taken as a whole, that leads us to believe that the present sell-off is a necessary flushing of the system and growth stocks that may have gotten a bit ahead of themselves. In addition, we are coming off a mid-term election, which has historically been good news for markets. According to Ned Davis Res
What Happened in the Markets This Past Week? After a period of historic market tranquility in 2017, a few weeks ago we reallocated and rebalanced our portfolios in order to provide greater opportunities and to help reduce risk going forward into 2018. With the rapidly changing market conditions of the last week, it’s more important than ever to be sure you are diversified, and properly balanced and allocated. Because we took a pro-active approach to managing our clients' accounts, they are in a better position to weather the volatility that has been generally absent from the markets for the past year. On Monday, February 5th, the S&P 500 Index and Dow Jones Industrial Average (DJIA) both fell more than 4%, marking the worst one-day percentage decline since August 2011. When combined with declines from last Friday, the last two trading sessions resulted in these indices falling more than 6%, bringing the indices back to levels as of mid-December 2017. Remarkably, the recent sell-off ends a streak of more than 400 trading sessions since the last time the S&P 500 Index had experienced a 5% pullback (dating back to the Brexit vote of June 2016). Asset Class Index January Return February Return (through Feb 5th) YTD-2018 Return (through Feb 5th) U.S. Large Cap S&P 500 5.7% -6.1% -0.8% U.S. Large Cap Dow Jones Ind Avg 5.8% -6.9% -1.5% U.S. Small
August 21, 2017 We know that many of you have been interested in the events unfolding between President Trump and North Korean Leader Kim Jong-un. Keep in mind that: Rhetoric does not necessarily equal action: No doubt there has been much bluster in the media lately between President Trump and North Korea’s Leader, Kim Jong-un. We should keep in mind, however, that rhetoric is not the same as action. Rest assured that military policy decisions are not being based on President Trump’s tweets or Kim Jong-un’s statements. President Trump is surrounded by a strong cabinet of highly accomplished and highly experienced military leaders including Gen. James Mattis, Gen. John Kelly, and Lt. Gen. H.R. McMaster. We should trust these leaders to guide our Nation through times of crisis. Market performance in times of conflict: History provides relevant context with respect to market performance in times of conflict. Since 1900, there have been 7 major geopolitical crises that have included armed conflict (WWI, WWII, Korean War, Vietnam War, First Gulf War, September 11th, Second Gulf War). Market performance during these periods can be described as mixed at best. In fact, markets rose more during periods of conflict than they fell. For example, from the start of WWI in 1914 through its conclusion in 1918, the Dow was up more than 40% or close to 9% annualized. From the start of WWII in 1939 through its end in late 1945, the Dow was up 50% or more than 7
In an election year that appears to be anything but conventional, voters may have slightly better clarity on Donald Trump and Hillary Clinton and where they stand on key issues following the conclusion of the two major political party conventions. Differences in economic policies of Clinton and Trump mostly follow along party lines and viewpoints about the role of government. Clinton proposes a measured agenda. It is one that offers change, but without revamping the existing system and without throwing aside longstanding practices such as staying within budget constraints. Trump is focused on three main economic policy issues: 1) raise barriers to immigration; 2) impose large tariffs on goods from Mexico and China; and 3) enact large tax cuts. The presidential candidates’ policy platform on key issues is detailed on the following pages and is reflective of information released as of September 12, 2016. However, details are expected to continue to emerge or change as the official debate season begins and as Hillary Clinton and Donald Trump enter the final weeks of the U.S. presidential campaign. Looking forward, the Commission on Presidential Debates has announced the following dates for the upcoming three presidential debates and one vice presidential debate where the candidates will meet head-to-head and discuss their positions on key economic and political issues. Ø First presidential debate: September 26, 2016 at Hofstra University, Hemp