Newsletter Quarter 4 2019
FOURTH QUARTER 2019 NEWSLETTER
While the stock market’s journey through 2019 was not all smooth sailing, the year ended strongly. Many domestic market indices finished in record territory. Nuveen’s January 2020 newsletter, “10 Predictions for 2020: Uncertainties diminish, but markets struggle,” notes that “every sector of the market posted gains for the year, with Technology (up an amazing 50.3%) and Energy (up 11.8%) being the worst relative performer.” The newsletter published key index performance 2019 total returns of: 31.5% for the S&P 500, 25.3% for the DJIA, and 36.7% for the NASDAQ composite. In comparison, they report the Bloomberg Barclays U.S. Aggregate Bond Index up 8.7%, and the BofA Merrill Lynch 3-month Treasury Bill up 2.3%. Their source for theses index numbers is Morningstar Direct, Bloomberg, and FactSet as of Dec. 31, 2019.[1]
The stormy market performance in December of 2018 and into early January of 2019, had many investors wondering if it was time to jump ship. Following a course correction by the Fed, which resulted in 3 rate cuts in 2019; along with strong consumer spending and low unemployment, we enjoyed a relatively smooth and steady recovery. Autumn brought renewed tensions between China and the U.S., and fears of a Global recession. The rate of growth in the U.S. economy continued to slow. But the Fourth Quarter brought improving market conditions, and investors found much to celebrate in December. With the new year upon us, analysts’ attention turns to predictions for 2020.
Robert Doll, CFA, is Senior Portfolio Manager and Chief Equity Strategist with Nuveen and is featured in the Predictions section of Nuveen’s January Newsletter. He reports that they see “both positives and negatives for stocks as we head into the coming year. Some key risks look more manageable, while other fundamental factors may be working against the markets. This looks to be a year in which investment selectivity will be critical.” Among the Top 10 Predictions listed, are that the Fed’s strategy remains “on hold” through the elections; that non-U.S. stocks may outpace U.S. stocks as the dollar weakens; and that stocks, bonds, and cash may all return less than 5% , which happened “in 2005, 2015, and 2018.” So, this is only three times in the last 25 years. He also adds, “this prediction perhaps puts us furthest out on a limb.”[2]
The new year means that we at the Galarneau Group are a year older and saltier; our experience has taught us we do better by keeping our ship on course, our eyes on the horizon, and our tools and equipment in good condition; focusing on preparation to react to whatever we encounter, than by predicting what will occur and setting an action plan based on our being right. There are numerous articles available this month about what to expect in the year ahead; and we take something away from most of those we read. We have set our course to be prepared for both the positives and the negatives. Sometimes, an event is both of those. A significant pullback in stocks is nerve wracking, but also a long-awaited opportunity for us to reinvest some of our cash. You have probably noted that we reduced cash in our portfolios in the last 2 months and increased fixed income, which could pick up some yield. We have been mindful in choosing bond vehicles, however, that we want flexibility to maximize any opportunity we encounter to purchase promising equities at good values. As we navigate through 2020, we are glad to have you on board.
Important Changes in Retirement Plans and Savings
The SECURE ACT (Setting Every Community Up for Retirement Enhancement Act) was signed into law on Dec. 20; and many provisions may have an immediate effect as of January 1st on those investing in Defined Contribution and Defined Benefit plans through work, 529 plans, and IRAs. Among the provisions are: Delayed Required Minimum Distributions until age 72, for those who have not yet turned 70 ½ before January 1st, 2020; eliminating the age limit for contributions to Traditional IRAs for people still working beyond 70 ½; and changing the distribution options and schedules for individuals who inherit IRAs from non-spouses. Over the coming months, the financial industry will be analyzing and adapting to the previsions of the new law. Stay tuned for more information.[3]
Working on tax returns will be front and center for most of us over the next several weeks. While we are not tax professionals, helping our clients with investment related tax matters and doing tax planning are an important part of our service. Please reach out to us with any questions or concerns which may arise. Happy New Year to you; and thank you so much for working with us.
Warmly;
The Galarneau Group
DISCLOSURE:
Past performance is no guarantee of future results. The Dow Jones Industrial Average is an unmanaged, price-weighted index of 30 large capitalization stocks with dividends reinvested. Please note that investors cannot invest directly in an index. The NASDAQ Composite is an unmanaged, market capitalization weighted index of stocks listed on the Nasdaq Stock Exchange, reported as price return without reinvestment of dividends. Please note that investors cannot invest directly in an index. Returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment. The Standard & Poor’s 500 Index (“S&P 500”) is an unmanaged, market capitalization weighted index of 500 widely held stocks, with dividends reinvested, and is often used as a benchmark for the U.S. stock market. Please note that investors cannot invest directly in an index. Returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. Amounts withdrawn are subject to income taxes. Withdrawals before age 59 1/2 may also be subject to a 10% federal income tax penalty and plan restrictions.
