January 2020 Letter

I hope you enjoyed a festive holiday season with your families. We wish you a happy, healthy and prosperous 2020.

Living your best life, if we understand the parlance of our times, is to say live in the moment. This seems like a reasonable strategy for short-term enjoyment, but a fairly mediocre life plan.

That approach appears a reasonable analog for 2019 and with 2019 drawing to a close after surprisingly strong returns, what does 2020 hold for investors?

It seems like a distant memory, but a year ago in December, 2018 the Fed issued its fourth rate hike of the year. The fed was still discussing the Fed Funds rate being below neutral and lowered their expectations of rates hikes in 2019 from 3% to 2%. Since that time the Fed has done a 540 degree (yes, it feels like they did a full 360 degree before doing a 180 degree.) By the end of 2019, the optimist in us wants to believe that the Fed has found its sea legs and messaging will be more consistent going forward. If both short term and long term rates remain less volatile and access to capital continues this could be favorable for the global equity markets.

Many of the risks we encountered in 2019 such as trade tensions, slowing global growth and potential recession risks have eased with the potential of a phase 1 trade agreement to be signed by the United States and China by the middle of January. If there is a substantial roll back to existing additional tariffs this could be favorable to both economies. I have received many questions on the upcoming elections and how that could influence the stock market. While the stock market is cyclical and it’s tempting for investors to look to history as they try to time their decisions, you can’t count on future returns to match past ones. If you examine the return of the S&P500 index for each of the 23 election years since 1928, you’ll see that in only four of them was it negative.

If you were to follow the theory that the fourth year of a term sees better returns than the first term, the market in 2008 should have had delivered better returns than it did in 2005, when George W. Bush was newly seated as president and the S&P 500 Index gained 4.90%. But 2008, an election year, saw returns drop by 37%. If you had followed the theory and invested in the stock market from October 1, 2006, until December 31, 2008, your investments would have been down by 6.8%.

The problem with investing based on such data patterns is that it’s not a sound way to go about making investment decisions. It sounds exciting, and it fulfills a belief that many people have that there's a way to “beat the market." But it's no guarantee. There are too many other forces at work that affect market conditions.

Furthermore, the underlying assumptions informing these theories may not hold up, either—that the first year of a term sees a recently elected president working to fulfill campaign promises, and that the final two years are consumed by campaigning and efforts to strengthen the economy.

Meanwhile, look for the economy to continue to grow at a healthy clip, reaping the benefits of a lower tax rate on corporate profits and less regulation. The economic consensus is that the US economy will grow only 1.8% in 2020 (on a Q4/Q4 basis), which would be the weakest growth since 2012. Instead, it could grow in the 2.0-2.25% range. In particular, look for both home building and business investment to contribute more to economic growth next year than they did in 2019, while growth in consumer purchasing power continues to boost spending. Entrepreneurship and public policy matter the most. The animal spirits of US entrepreneurs are alive and well; think about the innovations of the last decade and how they’ve changed the world and our daily lives. The US has gone from the world’s largest importer of petroleum products to being a net exporter. The value of the technology we can hold in our hands easily dwarfs what even the best desktops could do a decade ago. Meanwhile, public policy is helping boost growth rather than holding it back. No tax hikes, trade conflicts likely on the wane, less regulation.

The current expansion won’t last forever so rebalancing portfolios is critical as markets make record highs. We will be contacting you shortly as this is prudent after a strong quarter and year.

You should remain focused on your investment goals and objectives. If you have any questions or concerns with your current asset allocation and/or investments please do not hesitate to contact me.

I believe every solid relationship should center on open communication. You have several options to access the information you need to know about your portfolio, my firm, Raymond James and the financial markets. In addition to our in-person meetings and one-on-one calls, we'll also communicate with you through other channels, such as our website, newsletters and social media. You have already been receiving regular updates and emails from me. These communications are designed to provide you with insight into the ever-evolving financial markets and help build the confidence that comes from working with an experienced advisory team. If you haven't already done so, I encourage you to go to my website to learn more about my firm and access some of the recent research and articles available to you. I also utilize social media channels such as Linkedln. If you already have an account on Linkedln consider following me. These channels provide an excellent way for me to keep you up to date with relevant, timely news. Please let me know how you prefer to receive important communications and how frequently. We'll do our best to deliver. Guiding you toward financial independence is a collaborative process, and I hope you feel comfortable reaching out to me whenever you have questions, concerns or even new ideas to help me better serve you.

Regards,

Elliot Weissmark, CFP®, CPFA
Senior Vice President, Investments

Any opinion are those of Elliot Weissmark, CFP^®, CPFA 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. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. 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. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market.

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.

Keep in mind that the process of rebalancing may affect your tax liability. You should discuss any tax or legal matters with the appropriate professional.