Below, we submit our latest quarterly installment of Nvest Nsights.  The first article reviews how chaotic, volatile, and disappointing was the market’s performance during 2018.  But more important from our perspective is how swift selloffs like witnessed during the 4Q can cause one to suddenly feel confused and uncertain about the future; in these times it is most critical to step back and consider facts and fundamentals to avoid short-term action based on emotion.  The article “Shilly-Shally Prone” reminds how long-term investment success accrues to those who remain steadfast to a repeatable and disciplined process.  There are two remarkably similar historical backdrops which suggest it is very possible that present-day concerns could resolve or fade quickly against a still-sound economy, providing swift relief to recent market volatility here in 2019.  Finally, “We Work With Rock Stars” provides insight into our investment selection philosophy with rationale motivating several portfolio adjustments being executed over recent weeks and as we enter the New Year.

The full printer-friendly version of our newsletter, including data tables for selected mutual fund and ETF performance as well as portfolio benchmarking, can be downloaded here: NVEST NSIGHTS 4Q.

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In our quarterly newsletter that follows, the two feature articles are titled: “A Great Story Never Told” and “Flying on One Engine”.  The first discusses the prevailing skepticism, or even outright pessimism, that may best characterize the consensus of investors’ psychological mindset relating to what is now the longest bull market in US history.  The second article explores what are the polarized and opposing views of how the economic and corporate fundamental “tea leaves” are being interpreted and highlights what we see are the biggest risks threatening to halt the progressing bull market. We encourage you to review the full articles contained in our quarterly newsletter below. The full printer-friendly document can be downloaded here: NVEST NSIGHTS 3Q

A GREAT STORY NEVER TOLD

Following a tug-of-war market experience during the first 6 months of 2018, stocks surged ahead during the 3Q with the S&P500 up +7.2%.  It was the fastest advance since late 2013. Combined with the first half, the accumulation brings the YTD rise to just over +10%.  Company earnings and economic growth are rising at the fastest pace of this current cycle and expanding the current Bull Market run, yet these facts remain a great story never told.  Few want to acknowledge this Bull Market is now the longest running ever.  Also, few will acknowledge that the current economic rebound will shortly become the longest running ever.  This current run approaching 10 years remains unloved for a variety of reasons, including the fact that many investors experienced 2 Bear Markets in 15 years.  Those two experiences eroded investor portfolio values and family wealth, and wreaked havoc with investor confidence.  In reality, the only situation where the length of this economic rebound and/or market advance is cited is when stating its age as a compelling reason to anticipate the current trends must soon end.  Many continue to hold a keen aversion to owning risk assets even today.

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Combining the two commentary thoughts within Nvest Nsights this quarter, there are two watch points: the Fed tightening until something breaks, and tariffs until the market shakes.  Of these two, the former worries us the most, longer-term. We are historically reminded about 1984 and 1994 – strong economies and slow markets to be followed by 1985 and 1995. Maybe 2018 (strong economy and slow market) is the bridge for 2019 when stocks advance faster than the economy. Keep watchful and stay invested. We encourage you to review the full articles contained in our quarterly newsletter below. The full printer-friendly document can be downloaded here: NVEST NSIGHTS Q2

TARIFFS UNTIL THE MARKET SHAKES
The US economy is still growing and will enjoy its 10th anniversary in July. Shortly, it will become the longest expansion on record. Its progress helped unemployment reach its lowest in 18 years, at 3.8%. And, the second quarter should produce double-digit earnings growth again, for the 3rd consecutive quarter. So far, the US economy and corporate earnings provide the underlying fundamentals to support the current bull market growing older (since 3/9/2009 or 112 months, or 9.3 years). US consumer confidence remains solid which is important since consumers drive about 70% of the US economy.

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Printer-Friendly PDF Version Here: https://nvestwealth.com/files/newsletter_04_2018.pdf

Pulse Check

The stock market ended the quarter much different than it began.  Stocks roared in January with the S&P500 jumping more than 5% to set repeated records; until January 26^th.  Then, it’s as though the electrician changed the direction of the wall switch.  As we wrote in our March commentary, “Agitation Overdone”, the current pullback is the first drawdown exceeding -5% since February 2016 (almost 2 years), or 404 trading days.  The February drawdown took 10 days to erase -10%, wherein 83% of stocks declined -10% or more and the average stock gave up -14%.  March vibrated back and forth, retesting the February lows.  Corrections (-10% decline or more) are never comfortable, but most evolve into new rallies.  The evolution process typically involves 3 components – price, time, and emotion.  Price action can be quick, while emotional change takes time before playing out.  It seems probable that additional time and the evaporation of bullish emotion (sentiment) are needed before the Bull run continues.  An important part of any corrective process is converting optimism to pessimism.  Today, we are closer than at the early-February lows, which were retested in late March/April – now almost 30% of stocks are down 20% from their highs.

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