The Verus Team

Holiday Wishes & Our 2019 Market Recap & 2020 Preview

As we close out 2019 and head into the Holiday Season, we wanted to take a moment to pause and say “Thank You” for your valued relationship and pass along our well wishes to you and your family.

From one year to the next, we are reminded how unpredictable a year can be, and how it can directly and indirectly impact our lives. As we witnessed in the world of markets, 2019 was once again no different.

In what we like to call “The Most Hated Bull Market” of our respective careers (25 years + and counting in the financial services industry), 2019 proved to be quite robust when measured by the major US stock markets.

As we began the year, and all that we experienced in December of 2018, most would not have believed it would have ended so well.

Some reasons that we attribute to the strength in 2019 starts with - but is not limited to - the following:

  • Federal Reserve reversing policy from tightening to accommodative and lowering interest rates.

  • Visibility around trade with China – despite all the public posturing and volatility, the two largest economies on the planet, appear to want to get to a deal.

  • Better-than-expected US corporate earnings throughout the year.

  • Low US unemployment, Low Corporate Tax Rates, and Low Inflation.

  • Updated US – Mexico - Canada (USMCA) trade deal.

  • Strong Consumer Spending

     

Those are just to name some well publicized reasons that we can point.

In addition, 2019 (like other years) was not without headline risk and other political and geopolitical news that influenced the short-term market direction. We can list some of those examples too – the Mueller Report; Impeachment; Trade Fears; Inverted Yield Curves; Impending Recession; Presidential Tweets (still a head scratcher) – to just name a few.

Despite all these presumed headwinds, the news came, and markets remained resilient and chugged higher.

That is not a commentary on the news, or weighing-in politically one-way-or-the-other. It is only to point out that the market hit all-time highs despite all the news in 2019. There appeared to be a lot of reasons – based on the headlines - for markets to roll over, but they pressed higher.

So, what does that mean for 2020?

HA! Well, given that 2019 was so easy to predict, let’s look out to next year - AN ELECTION YEAR! That shouldn’t add any drama or headlines – should it?

From a “Stock Market’s” perspective, here are a few things to consider heading into 2020:

  1. Often following a 20%+ return through November (as measured by the S&P 500 and Dow Jones Industrial Average (DJIA) indices), the US stock markets following 12 month returns (Dec. to Dec.) usually have a strong follow through (see this article highlighting this point) - https://www.cnbc.com/2019/12/10/dow-sp-and-nasdaq-could-be-in-for-another-huge-run-in-2020.html
  2. Interest rates will likely remain unchanged and lower, and the Federal Reserve is expected to continue expanding their balance sheet. This is intended to further entice funds into risk assets and stimulate inflation.
  3. Year-over-year corporate earnings comparisons in Q1 and Q2 should be favorable in 2020 when compared to 2019.
  4. General Investor Sentiment remains cautious / skeptical, and many believe the economy is fragile and bound to reverse direction at any moment. Many investing pundits will tell you that bull markets die on euphoria, and we are not yet sensing euphoria. (Please see “Most Hated Bull Market” reference).

 

These are highlighting just a few points that seem bullish for US stock markets going into 2020, and there are certainly others to mention. Notably around trade agreements, closure with Brexit, and possible European fiscal stimulus - to name a few more.

As we know however, despite all the presumed tailwinds, that doesn’t mean stock markets will cooperate and continue higher. Stocks have had an amazing run in 2019, and the US Presidential Election in 2020 will garner a lot of attention.

We do think investors will be watching, and possibly moving to a more cautious stance as the election drama unfolds and plays out throughout the year.

It seems reasonable to ask:  Why not look at all that was good in 2019 and prune a little?

Is that an irrational consideration?

Despite being a favorable environment for investing, it does not mean it will continue, and as we have seen in the past, risk and reversals can happen fast. We are not predicting such a move, because as we mentioned above, there are several things supporting higher asset prices (notably stocks). However, we are also not ignoring that 2019 was a very strong year, and US politics will likely impact investor psychology in the year ahead.

What does that mean for you?

Well, that depends on Your Situation, Your Current Asset Allocation, Your Tolerance for Risk and Volatility, and Your Time Horizon for Your Dollars.

We all have short, intermediate, and long-term needs with our money, and it is important to recalibrate - at a minimum annually - to make sure those things are appropriately aligned.

We invite you to reach out to us to schedule a time to connect and schedule a call or appointment in early 2020.

As we close out 2019, we have a lot to be grateful for, and the holidays afford us some time to sit back, relax with family and friends, and reflect upon the year. It also allows us some time to begin thinking about the year ahead and what we want to experience, address, and achieve.

Sometimes, those experiences, tasks, and goals require planning and your money. When the focus turns to those priorities, we look forward to collaborating with you and your family to navigate 2020 appropriately. It is bound to be another exciting and unpredictable year.

Until then, THANKS again for your patronage in 2019, and We Wish You and Your Family a Wonderful Holiday Season, and a Healthy and Prosperous 2020!

 

Derek, George, and Merit

Steward Partners Global Advisory, LLC and The Verus Team maintain a separate professional business relationship with, and our registered professionals offer securities through, Raymond James Financial Services, Inc., member FINRA/SIPC.  Investment advisory services offered through Steward Partners Investment Advisory, LLC.

Investing involves risk, investors may incur a profit or loss regardless of the strategy or strategies employed.  Past performance is not a guarantee of future results.

The S&P500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market.  The Dow Jones Industrial Average (DJIA, commonly known as “The Dow” is an index used to measure the daily stock price movements of 30 large, publicly owned U.S. companies.  The NASDAQ composite is an unmanaged index of securities traded on the NASDAQ system.  Please note direct investment in any index is not possible.

There is no guarantee that the statements opinions or forecasts provided herein will prove to be correct.

Links are being provided for informational purposes only.  Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.

AdTrax 2877816