Financial Markets Check-In

The S&P 500 is up a whopping +24.4% so far in 2019 and many investors are feeling giddy. Despite tariffs, politics, and slow growth in Asia & EU, the American economy continues to chug along. Hooray for growth!

It’s not hard to forget that people were quite pessimistic coming into the year. Goldman Sachs had predicted markets to only be up “modestly” in 2019, with their forecast pointing to +5% growth. I bet my friend Russ – who once hammered the closing of the New York Stock Exchange – a beer on how the market would do in 2019, and he took the ‘under’ on 2% growth.

Related: New Year, New Markets 2019

Of course, many forget that last year ended on quite a low note. Talk of recession was in the air after an ugly fourth quarter to the year. In fact, if you look at the last 14 months, instead of the last 11, the S&P 500 is only up 7.1%. That’s pretty ordinary. Those extra 3 months were a big hole that the market had to recover from.

I’m guessing that 2020 will be tricky to forecast too. We continue to see inversions between the 10 year and 3 month bond yields, and the NY Federal Reserve is reporting that there is a 40% chance this could be a harbinger of recession in the next 12 months.

We’re carrying about 3 years expenses/spending in cash right now and feel ready if the financial markets get challenging. That should be a pretty good buffer. In addition, I don’t expect to make any changes to our investment mix, as that is set up for a longer-term horizon – more like 10-15 years.

Still, I’m feeling nervous for how quickly markets can change and know that it is not much fun to see the economy reset & struggle.

Anyone else nervous for what 2020 might bring?

5 thoughts on “Financial Markets Check-In

  1. Each new year brings opportunity. For loss. For gain. Forward planning and deep diversification prepare us for stormy seas — and blue skies. I try not to fret too much over that which I have no control. And try to influence that which I can. As a cockeyed optimist, I always feel the best is yet to come, no matter the troubles of the day.

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  2. My concern…China. If China goes full hard line on Hong Kong, does Trump go nuts with tariffs? Remember that there is still a lot of cash on the sidelines and the best and safest returns have been and continue to be US securities on a worldwide basis. I am also concerned with the election. I have no idea who will be our choices, but from a financial perspective Warren and Sanders frighten me. The key is that I don’t owe any money and can live on pension income only, my investments which I have yet to touch are growing and my consulting is more lucrative than I planned on

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    1. I have my own personal conspiracy theory on the China tariffs: I think that as long as the economy is good, Trump will push China hard. Since he doesn’t control any other economic levers (tax rates, interest rates, jobs programs, etc), he holds onto this in case he needs a little bump during next year’s election season. Not sure how Hong Kong fits into the equation … we don’t seem to have a problem with human rights in the rest of the country.

      Quick question: How does one track how much cash $ is sitting outside of the market on an ongoing basis? Is there good source for that?

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      1. I don’t know of a source for cash sitting out of the market, but from investment newsletters that I read, Raymond James, Capital Wealth Planning,WSJ, Barrons and others, the word lately is the amount of idle cash. I do wonder if that cash is what took the Dow from 27k to 28k. Might we see a 20% correction? Yes, but from what level will that correction come from and when it occurs, 28k might be the entry point.

        I’m the first to admit that I need to relax more about my investments, I hate to backtrack. I have an unAmerican problem. I hate to spend money and view myself as a caretaker of my wealth for future generations.

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      2. Have you seen the Dave Ramsey book about intergenerational wealth? It’s an OK read – not great – but some interesting thoughts.

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