For a quick recap, 2018 was the worst year for the major market indices in a decade. For example, the MSCI World Index was down 8.7%. Balanced and diversified portfolios should have been down a little less because of holding some fixed income and other asset classes. We had only a few panic calls around the holidays. Anytime we get these types of calls from clients, we recommend staying put and not getting caught in the market sell offs and trading drama.
And then, as you know, the market recovered very quickly earlier this year and here recently hit new all-time highs. Couple of quick FUN (debatable) facts: The S&P 500 is only 4% above where it sat as of January 2018. December 2018 was the worst one since 1929 (Yikes, anytime compared to Depression timeframe can be scary). January 2019 was the best since 1987. May 2019 was the worst since the 1970’s. June 2019 was the best since 1958.
So, what now? Predictions of a recession in the next 12-18 months are increasing, but of course we know that doesn’t mean it will happen. I believe there will be a pullback in that timeframe, but I am not convinced it will be a deep recession anywhere close to 2008. The good news is that companies are still growing. Although, as I believed earlier this year, growth is slowing- but NOT stalling. Fundamentals remain strong, with a few caution signals starting to emerge.
The election next year and the soap opera we will be blessed with to watch on every network channel will likely be a big factor on the timing of the next recession. Will Trump stay in office and continue with pro-business policies that could keep this bull running? And if so, will he remain stable and calm, lower his twitter posts and keep the rest of the world happy? I’ll digress there… Or, will we get a democratic president, and will this person increase regulations and cause business owners to pull back and therefore slow growth down? Or will they be more of a centrist and excite the markets and economy? It’s all to be determined, but these things, along with Trump working on various trade deals and the FED actually looking at rate reductions versus the increases last year, are already being priced into this record level market in my opinion.
So, our investment committee continues to make small shifts to quality stocks over high growth in this late stage bull market as well as revisit our fixed income holdings to identify the best rates without taking unnecessary risks for our clients.
As always, turn off the TV (unless it’s a good show NOT economy related), spend time with your loved ones, and focus on experiences and memories over things you can’t control. We love what we do and my entire team is here to help!
The information contained in this video does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete, and is not a recommendation. Any opinions are those of David Adams and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investments mentioned may not be suitable for all investors. The S&P 500 is an unmanaged index of 500 widely held stocks. Keep in mind that individuals cannot invest directly in any index. There is an inverse relationship between interest rate movements and bond prices. Generally, when interest rates rise, bond prices fall and when interest rates fall, bond prices generally rise. Individual investor’s results will vary. Past performance does not guarantee future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Prior to making an investment decision, please consult with your financial advisor about your individual situation.