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2019 Investment Review - Party like its 1999!

The market performance and zeitgeist I felt at the end of 2019, I have not seen this “exuberance” since the 1990’s.  And it had a similar feeling like 1999 entering a new decade with lots of optimism.  Optimism after a year in which the Federal Reserve (Fed) reversed course and cut rates and trade tensions were easing as we got closer to a “Phase 1” deal with China.  So, to borrow from the late Prince, “Party like its 1999!” 


After a strong year for the markets it may feel like what comes up must come down.  Furthermore, it didn’t take long, roughly 2 days into the New Year, to give us something new to worry about, this time geopolitically with tensions over Iran rising.


But don't fret, the odds still point to a positive up year.  With history as a guide the main stock markets are up more than down but also after a big up year of (20%+) the Dow Jones Industrial Average is up 75% of the time based on this research by .  My personal indicators I use from still lean towards stocks.


The Fed avoids a policy mistake


The biggest story for the markets in 2019 was not the trade war with China that grabbed more headlines and attention.  I feel it was the Fed reversing course in early part of 2019 by doing a 180 turn from increaseing rates to then cutting 3x.  The market was declining sharply at end of 2017, after perhaps the Fed raised when they should not have, however seemed to avoid a policy mistake by changing course.  The then markets recovered quickly to new all-time highs within the year.


A lot of these “non-stories” in 2019, trade wars, yield curve inversion, etc. could still play into 2020 or 2021 which was the base case for when I personally expected the next recession to hit.


2020 Election Year


Many will be eyeing the upcoming election and political ramifications in 2020.  Historically, the year of the presidential election (4th year in the election cycle), has been the 2nd best during that four-year cycle.  In other words, the year before the election has been the best followed by the year of election has been second best.  The first and second year after an election has trailed the third and fourth years. (Source: 2019 Stock Traders Almanac)


2020 & Beyond


I keep an eye on all the usual, jobs, interest rates, consumer spending, and geo-political events.   But I am also more concerned with longer term trends, like corporate debt levels and international markets to name two.  A new decade brings a fresh perspective on economically dominant areas of the globe.  Think of the world in four parts which are the largest economic zones:  US, Europe, Japan, and China (emerging markets).


Recall in in the 1980's it was all about Japan, remember they were buying up a lot of US iconic real estate from Hollywood to Wall St and Madison Rockefeller Center became symbolic of that trend. They were beating everyone.  But in the 1990's it was back to the US.  The 2000's were China and the emerging markets even Europe.  The Euro touted as a possible reserve currency, etc.   Then the 2010's were back to the US.  What will the 20’s bring?  With history as a guide the US won’t be the leader forever.   


In closing, it is often an unknown surprise that catches the market off guard which you can’t predict or see coming.  A good defense starts with staying diversified and having a good plan in place to face the uncertainty.  Please contact me if you would like to review your plan.

Adam W Pearce


The views and opinions expressed herein are those of the author(s) noted and may or may not represent the views of Capital Analysts or Lincoln Investment.  The material presented is provided for informational purposes only. Nothing contained herein should be construed as a recommendation to buy or sell any securities. Past performance is no guarantee of future results. No person or system can predict the market. All investments are subject to risk, including the risk of principal loss.  The Federal Reserve System (also known as the Federal Reserve, and informally as the Fed) is the central banking system of the United States and controls the Federal Funds Rate (aka Fed Rate), an important benchmark in financial markets used to influence the supply of money in the U.S. economy.  The Dow Jones Industrial Average is a widely watched index of 30 American stocks thought to represent the pulse of the American economy and markets. Investors cannot invest directly in an index.  Diversification does not guarantee a profit or protect against a loss.