“Hindsight is 2020”, “2020 Vision” & “Sparks Start Fires – Nvest Nsights Q4 Newsletter

Happy New Year, and new decade!  Time flies – just twelve months ago investors entered 2019 questioning whether the bull-market might be dead following a relentless and jarring 4Q’18 decline coupled with anxiety that the Federal Reserve would continue pursuing step-like rate increases despite rising uncertainty related to trade and tariffs.  At that time, who would guess that the year would provide the most attractive full-year market performance in over 6 years?!

In this quarter’s update, “Hindsight is 2020” provides a quick recap of the recent year, but more significantly why it is so important to battle temptation to invest based upon short-term worries or negative headlines alone.  Continuing, “2020 Vision” [bear with us as we enjoy the easy puns available this calendar year] discusses the key themes we’re focused on this year and how those shape our expectations/forecast for the broad economy and investment markets in the upcoming year.  Among the themes are a Fed that appears on-hold; the Money Supply (M2); international economic fundamentals and investing opportunity; bond markets; and a US Presidential election year.  Lastly, “Sparks Start Fires” offers quick thoughts on escalating middle-east tensions and how these geopolitical uncertainties may cause market jitters in the short term.

The printer-friendly version of these newsletter articles can be obtained here: Nvest Nsights – Q4 ’19 Newsletter.

Also included in the newsletter (and posted separately here), our personal finance topic this quarter overviews the recently passed The SECURE Act and broad implications for both owners and beneficiaries of retirement accounts.

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The “SECURE” Act

Against a noisy political backdrop and busy holiday season, it would be easy to miss a key piece of legislation called the SECURE Act that was signed into law in late-December that touches in one form or another most all investors and current retirees.

We are receiving some questions regarding the act’s passage and would like to call attention to the two sections we believe are of greatest impact. Before we jump to discussing The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), we want to remind you that we view it important to stay abreast of changes to laws or rules that could impact your financial future.  We monitor them almost as closely as we monitor the markets.

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Eyes Shift to a New Year and New Decade!

Here we are… the final day of 2019 and 2nd decade of the 21st century.  The recent year provided stocks with their best annual performance in six years, but what a decade it’s been!  The current bull market has endured over its entire tenure, albeit like most trends it was not without many periods where it looked over.  If there was just one theme to characterize the economy and market direction over the recent 10 years, it would be “uncertainty”.  Uncertainty and relentless skepticism was borne from a sub-par economic recovery; financial repression via historic-low interest rates; and what feels like extreme political unrest both in the US and abroad.  But, financial markets often climb a wall of worry.  2019, and this current bull market, are testament to why time is each investor’s greatest ally and that one cannot allow themselves to invest based upon headlines or emotion.  Investment success is all about “time in the market”, not “timin’ the market”.

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“Markets Will Always Surprise” – Market Commentary for December

On the eve of Christmas 2019 and the passing of another decade, why was the stock market performance so strong this year when the economic backdrop was so soft?  How can stocks perform well when the economy is so worried about many things, including slow growth?  How many investment forecasters predicted this year’s strength when the 4Q selloff a year-ago almost ended the current Bull market run; or that the Fed would abandon its rate hike cycle and instead cut rates 3 times?  The financial markets always provide surprises which no one can time.

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“Fire Engine Called!” – Market Commentary for November

The US economy is soft and many others around the globe are contracting due to lingering tariff issues between the US and China.  Since the first threat of tariffs announced in January 2018, at which time the markets “shook” lower, each additional threat seemed to escalate anxiety and provoke the stock market to lower values.  Their prolonged threat lowered US and global economic growth prospects because business leaders are stymied to make long term business decisions involving investments into plant and equipment, and/or hiring new employees.  Making things worse, the Fed raised interest rates during 2018, appearing unaware or unconcerned that those actions would also slow economic growth prospects.  That adds to “double trouble” for investors.  “Quick, call the fire department.”

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Start to October May Conjure Spooky Memories – Week Ended 10/11/19

On the heels of a September which was generally attractive, the markets entered October again looking spooky. In fact, like a year ago where the high for the year was observed on September 21, the S&P500 was off almost 4% between September 20 and October 2. That could be eerie for anyone paying close attention. In recent weeks, the US economic picture seems to be getting increasingly muddied by the sluggish international backdrop as fresh data ranging from manufacturing, services, inflation, and jobless claims all appears to be confirming a broad slowdown observable via downbeat readings coming in from abroad. Some meaningful market action reprieve arrived late last week as the US President offered a more optimistic narrative around current trade talks with China at the same time as reports of productive Brexit negotiations (a more than 2-year uncertainty at this point) we hitting the wires. Both domestic and international stocks jumped higher to end last week.

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“September Crazy” & “Big FAT Yields” – Nvest Nsights Q3 Newsletter

Despite persistent and worrisome headlines dominating the news flow all year, US Stocks enter the 4th quarter with their biggest YTD gains in more than two decades.  In this quarter’s update, the article “September Crazy” discusses why the current bull market – which began 127 months ago and is now the longest in US history – could still advance further due to fundamentals and an anything-but-euphoric sentiment.  “Big Fat Yields” (or the lack-thereof) shares several implications of low interest rates, the message from the yield curve, and the Fed’s likelihood to pursue additional cuts.  The above themed titles taken together might also be a reason why the market leadership shifted abruptly in September; will we see the rotation wherein “Losers Win; Winners Lose” continue into the 4Q?

The newsletter also contains two brief Personal Finance themed notes: “Doing Diligence” and “Transitioning from a ‘Saver’ to a ‘Spender’ in Retirement” are related, but speak to the importance of discipline (be it with saving, investing, etc) as well as the emotional hurdles we observe for many individuals either at the doorsteps or in the early innings of retirement.  These articles can be found posted separately.

Click Here to Download the printer-friendly PDF version of our newsletter or continue reading below.

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Transitioning From A “Saver” to a “Spender” In Retirement

I  carefully saved for most of my life… now you are telling me that I need to spend my retirement nest egg?

One of the most difficult transitions many individuals will face in financial life is moving from being a “person at work” (the accumulation phase where you are saving and building wealth) into  someone now living off their “money at work” (the “decumulation” phase).  A recent study by BlackRock Retirement Institute found that “instead of actively and systematically decumulating assets, retirees display a tendency across all wealth levels to retain assets and not spend down their initial principal.” The study also found that, “More than one third of current retirees actually grew their assets – leaving considerable potential consumption on the table.”

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Sleepy Market Action Despite Noisy Week – Notes for week ending 9/20/19

US stocks broke a multi-week winning streak, but did so with very “sleepy” daily moves.  For the week ending September 20, the S&P500 gave up -0.5%, but remains +2.4% higher for the month.  International markets also slipped, but likewise were controlled in their daily moves.  Whereas the month of August was an alarmingly volatile period with 18 of the 22 trading days experiencing moves greater than ±1%, the S&P500 has closed up or down by less than 0.75% in each of the past 12 sessions – the longest such streak since the end of July.  Such streaks appear common in 2019 when investors look uncertain about the direction of the global economic outlook.

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The Geopolitical Backdrop Remains Highly Fluid – Week Ended 9/13/19

Perhaps it’s just us, but we are struck with how surprised most clients are that the markets are very close to achieving full recovery of their all-time highs set in late-July.  Maybe that’s because the media wasted no time in bringing focus to how adversely financial markets reacted to abrasive tweets (Trade + Fed) from the US President last month; or the reporting that the yield curve inverted – a somewhat technical concept that few mom & pop investors/savers understand beyond being told that it has a decent historical record of signaling economic recession.  The overall mood can at best be described as sober.

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