“The Price is Right?” & “Framework for a Path Forward” – Nvest Nsights Q1 Newsletter

Nvest (Bill, Steve and Jordan) wishes for you and your family/friends good health, safety and wellness from this COVID-19 virus and the economic challenges.  We are greatly concerned by the very real human health impact and ongoing crisis; praying for a timely cure for these current health and economic challenges.  Let us know of your worries and if we can be helpful.  While it would be unwise to meet in person due to social-distancing protocol, we can visit virtually via web meeting to review your needs, portfolio reactions, and discuss LIVING LIFE financial planning questions.  Call or email to coordinate a time to visit.

This quarter you will find several timely updates.  First, “The Price is Right?” reviews how swift was the transition from bull market into bear and shares historical perspective; places the size of recent government responses in context; and what we are watching to signal that durable recovery may be near or developing.  “Framework for a Path Forward” examines whether the market low observed on March 23 was “a” low, or “THE” low.  It is important awareness that retests are normal during periods of market stress, but the market will offer clues beneath the surface about where we are and when/what actions are appropriate to position portfolios for recovery.  “Thoughtful Comments for Careful Consideration” is a compilation of notable quotes from highly respected individuals that can be helpful during challenging environments.

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“Hysteria Unmerited” – March Commentary

Does any investor believe the last week of fast-moving negative market action was reasonable?  Continuing our theme relating to seeing clearly with 2020 vision…. from our perspective, and many other research pieces we are receiving, indicates this past 7 days was “hysteria unmerited.”  It is mind boggling how many traders (not investors) display a “shoot first and ask questions later” mentality.  When one is unable to understand or is unable to quantify a concern, natural intuition reaction is “jump, and look later.”

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Seeing Clearly in 2020 Vision: “Red, Blue & You” – February Investment Commentary

We continue our theme relating to seeing clearly with 2020 vision. January started the new year and new decade with positive action – new stock market highs on the first trading day of 2020 and 5 additional dates from there with the most recent occurring on January 17th.  Since then, the market caught the flu.  Volatility jumped toward the end of the month, as China “exported” fears of a contagious and not well understood Coronavirus.  The S&P500 Index forfeited away 3% gains to close marginally negative at month end.  Stocks, both domestic and foreign, showed “flu-like” symptoms, while bonds offered a “safe haven” with yields falling (prices rising).  Client portfolios with more bonds performed better than those with greater stock market exposure during January.

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“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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“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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“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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“Geopolitical Landscape on Fire” – Market Commentary for September

The current global trade war concern first emerged 18 months ago; as recent as May it was generally believed a US/China trade deal could be negotiated.  That deal on paper was reportedly 80% complete.  At the same time, some trade progress occurred elsewhere (USMCA/NAFTA 2.0), but the US/China negotiations are unfinished and appear virtually collapsed.  One even wonders if a US/China deal can resolve before the next US presidential election in 2020.  The reality is China does not feel the same political urgency and is unlikely to back down quickly, instead they favor projecting a tough image.  That means more economic pain will probably occur before meaningful talks resume.  A major issue – Intellectual properties protection – is a complex subject to be resolved.  In essence, it appears we are in the throes of a “New Cold War” with potential big influences on the domestic and global economic and financial outlook.

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“Kool-Aid Investing” – Market Commentary for August

It’s pretty easy to hear the same investment theme these days “as many investors go to the same dinner”; hear the same story; and drink the same Kool-Aid.  The huge world of investible assets is quickly shrunk down to just a few of the same companies owned by many.  But years of tepid economic expansion and low returns cause many investors to be hesitant to broaden their holdings beyond the few stocks delivering eye-catching results.  This includes index ETFs (passive strategies) that own outsize exposure to the same fast growing companies.  Even today as global growth is slow there is caution to invest otherwise despite a record widening valuation gap between growth and value stocks.  Additionally, money flows are more concentrated and could exasperate market volatility and drawdown for these heavily owned exposures.  Did you know, the FAANG stocks provided 25% of the YTD2019 return for the S&P500?  [FAANG stocks = Facebook, Apple, Amazon, Netflix and Alphabet’s Google]  Together they are a large portion of the S&P500’s total market capitalization, and their growth sizzled in recent years.  Yet caution is warranted as they are priced to “perfection” – requiring close awareness to their rich valuations and being widely owned.

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Undistracted – Market Commentary for June

If you travel through the village of Mantua in northeast Ohio, don’t drive with a dog in your lap.  Determined to stop distracted driving, the police are aggressively issuing tickets to curb behaviors such as driving with an animal sitting in your lap or texting.  All around the world, new laws are being written to address distracted driving.  It is also important to not let various happenings distract us from accomplishing important plans of life.  That includes plans about your finances – financial planning and investing for the future.  We all know from experience that life events can get in the way of advancing forward with best laid plans for the future.  Nevertheless, keeping plans and goals in our foresight provides better chance to achieving them.

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