MARKET ALERT for March 9, 2020 – “Year of the Rat”

Ironic – today, Monday March 9th is the 11th Anniversary of the March 2009 stock market lows, meaning this date was the start of the current bull market advance (we’re wishing it runs longer).

Generally, we are not fond of writing Market Alerts, as it often signifies market action that is unsettling to investors and clients.  Further, no one knows exactly how to model a global pandemic.  And, we usually don’t give a passing thought to the entity that China uses to describe its New Year, this year being called the “Year of the Rat.”  Not to travel that path; yet most are well aware that rats carry all sorts of disease and illness if active pursuits of cleanliness and pest control are not followed.  The global health environment appears to be actively searching for effective measures to curb the spread of Coronavirus.  Additionally, Washington DC appears to be treating current events as mainly a health-policy issue.

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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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MARKET ALERT – Seeing Clearly in 2020 Vision: Keep Seat Belts Fastened

If we owned a crystal ball, we might know when to sell before big market moves down. If we owned a crystal ball, we might also know when to buy at the market low, before big moves up. Would you like to use a crystal ball for your investment timing tool? We know that if you rely on the crystal ball for investing, sooner or later you will be dining on crushed glass. No one owns a crystal ball that works. Don’t attempt to use one.

Given the volatility in the global and domestic markets this past week, it may be helpful to summarize a few thoughts for consideration:

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Market Catches the Coronavirus: Thoughts Around Current Volatility – 2/29/20

In recent days, the US financial market’s relative calm has fallen victim to rising fears relating to the coronavirus – more technically referred to as covid-19.  In just two days, the S&P500 and Dow have “skinnied” by more than -6% and the loss over the last week roughly -7.5%.  Many international markets are down even more sharply, especially amid already weak or recession-like economic data.  This is a stark contrast from the very attractive gains the market was enjoying in February as the narrative around the new virus seemed to be calming/contained from when it first began hitting newswires a month ago.

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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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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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