Hello & Happy Fall. We trust this short note finds you well.
2019 has been an interesting year with the bulk of the market gains coming in the 1st quarter. And those gains were essentially a recovery from a rough 4th quarter last year. Over the last 2 quarters we’ve been close to flat. Click here for a 3rd Quarter 2019 Market Review and supplementary article.
Currently the S&P500 is 1%ish from the all-time highs set in July & September and only +4% over the last 21 months. The bottom line is corporate earnings growth, in general, has been tough to find over the last several quarters. The good news is 2020 earnings estimates look solid and we expect this bull market to slowly grind higher into next year.
As usual there are many reasons to be concerned: our never-ending political circus, impeachment threats, tariff/trade wars, a slowdown in manufacturing, Syria, and next year’s Presidential election, among others. The ‘wall of worry’ is tall, and always is.
The good news is unemployment continues to hover near record lows, productivity and consumer confidence is strong, interest rates are low, banks continue to lend, and bank balance sheets are as solid as ever. Throw in the fact that, typically, markets are strong October thru January, earnings reports have been good so far this month, and hard economic data looks to be turning up….well, we believe this stubborn market has the potential to break those summer highs fairly soon.
Our crystal ball isn’t any shinier than anyone else’s but, all things considered, we simply don’t reside in the doomsday camp. That said, we are seeing equity funds rotating slowly with strong relative performance by U.S. Value, Small Caps, International and Emerging Markets over the past few weeks. In short, 2019 has been a year where diversification has worked. We will have more commentary on these developments in future newsletters.
As always, please never hesitate to reach out with questions or concerns.
Your LJI Team