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?