The Role of Insurance
December 1, 2019
Documenting a QCD on Your Tax Return
January 29, 2020
By Brett Freese
Market Highlights:
- Stocks had a strong 4th quarter in both the US and internationally. Interesting note: Small Cap stocks slightly outperformed Large Cap stocks and emerging markets outperformed developed markets
- Bonds were positive with corporate bonds leading the group
- Gold weakened, stocks strengthened, and global tensions subsided.
Economic Notes:
- In spite of the on goings in Washington DC, the markets staged a strong final quarter to 2019.
- Federal Reserve lowered the Federal Funds rate target range to 1.50 -1.75%. Note: The Federal Reserve has a dual mandate to achieve both stable prices and maximum sustainable employment. Additionally noteworthy here is that historically the Federal Reserve attempts in a Presidential Election year to leave rates unchanged until after an election so as to be seen as non-partial.
- China and the US make a phase 1 deal to halt the progression of a trade war. Much more in terms of negotiations to come in 2020.
- 2020 should bring with it increased volatility due to the emotional roller coaster of a presidential election.
Historical Stock Market Declines:
Market declines and inclines rarely look the same or even feel the same, but they do happen and the ups and downs are a part of the process – It is important to have a plan/strategy so emotions don’t dictate buying or selling.
A 5% or greater loss occurs about 3 times a year
A 10% or greater loss occurs about once a year
A 15% or greater loss occurs about once every 2 years
A 20% or greater loss occurs about once every 3.5 years
Please know that when stock prices go down the “market collapse gurus” receive the most air time. Likewise, when stock prices go up all the “bull market gurus” talk about how the market will continue to be up BIG. Please know that most “gurus” are great with hindsight to justify how important it is to have their voice heard.
Market Scorecard for the last 13 weeks ending 12/27/2019:
US Equities:
+9.92% S&P 500 (Index of the largest US publicly traded companies)
+10.13% Russell 2000 (Index of 2000 Small-cap US publicly traded companies)
Global Equities:
+5.76% MSCI EAFE (Index of Large and Mid-cap across 21 developed markets non-US)
+9.75% MSCI EM (Index of Large and Mid-cap across 24 emerging markets non-US)
US Bonds:
+1.37% Corporate Bond – Morningstar Category
+0.24% Short Government – Morningstar Category
+0.76% Barclays Municipal Bond Index
Other:
+0.57% Morningstar World Bond Category Index
-2.63% LBMA Gold Price
Market Indicators:
Inflation:
2.05% as of 12/11/19 (Up 0.30% from 1.75% in September)
Unemployment:
3.50% as of 12/06/19 (Down 0.20% from 3.7 in September)
Fed Funds Target Rate:
1.50 -1.75% as of 12/24/19 (Down from 1.75 – 2% on 9/27/19)
Suggested Next Steps:
- Understand that market cycles are normal. The markets go up and down in mostly unpredictable directions and amounts. The ups and downs of investments many times seem to make sense only after they happen, however, market prediction is very difficult. (i.e. the next stock market crash has been predicted every year since 2008).
- Your investments are just one factor in the success of your life, money, and purpose. Make sure that you are confident in your full financial plan, so you can successfully have an amazing ROL (Return on Life).
- Your investment allocation and diversification are important factors in both risk management and future returns. Therefore, if you have questions about your investment plan, please schedule a phone or in-person meeting with your TrustWell Financial Advisor(s).
