Reasons to be Thankful in 2019
By: Steven Higgins, Financial Advisor, Principal
As 2019 charges into the holiday season and we prepare ourselves for the annual culinary onslaught starting with Thanksgiving this Thursday, I thought it would be worth noting the contrast between 2019 and the previous year. It was just a year ago that the stock market was on the verge of notching the first negative year in a decade and the S&P 500 ultimately found a bottom on December 24th, 2018 at the depths of a 20% correction. It seemed to be the season of fear and there was no shortage of Grinches foretelling doom. Now, as we sit on the other side of reality, stocks are well off lows and routinely notching new highs. The foretold economic peril never materialized, yet the doom and gloomers still haven’t given up hope that a global slowdown, trade war, or otherwise terrifying thing will derail what is proving to be a continuation of this lengthy albeit hated bull market. So, we can lament the fast approaching and sure to be nasty presidential election year or we can take a moment to be thankful for the fact that we, as long-term investors have once again won the day. I choose thankfulness and in the spirit of thanks, I propose a toast of sorts. So raise your cups of coffee!
Stocks Up.
The S&P 500 produced the first 20% correction and also the first negative year in a decade in 2018 and it all capitulated right at the end of the year, giving 2019 an easy setup for a positive year. That being said, investors are thankful that the S&P 500 is currently sitting with a year-to-date gain of 25%.*
Bonds Up Too.
The first half of 2019 saw interests rate drop significantly while the price of bonds which moves inverse to rates moved higher. The Barclays US Bond Aggregate index is up 8.63% so far this year.*
No Bubbles in Sight.
The last three years have seen gains in the S&P 500 of over 40% while the Price-to-Earnings Ratio (PE Ratio), a measure of stock value, has stayed about the same. This gives the indication that the increase in stock prices is related to an increase in corporate earnings and not because of an unsustainable increase in stock market speculation. The end of a bull market is often characterized by a spike in PE Ratios, indicating an increase in speculation. In the late 1990s this type of euphoric stock buying was coined “irrational exuberance” by Alan Greenspan; this is not that.
The Resilience of America.
While it’s true that we face challenges from abroad as well as within, I won’t buy for a second that the American resolve has been degraded. We as a nation have never been more productive and innovative. Every bet I’ve ever seen made against the prosperity of America has been a losing bet and our experience working with a sample of the best that this country has to offer is that the strength of this place is in the core set of beliefs and values that we have in common; the want for prosperity, growth, safety, opportunity, and equality. There are those that seek to divide us along arbitrary lines for their own gain. History says they’ll never win.
Thank you to our incredibly community and clients. You are our friends, and while there is so much we can’t control, we want you to know that we work every day to be the best we can as we serve you and help you pursue your goals. Happy Thanksgiving from the team at HD Wealth Strategies.
*Source: Y Charts
Securities offered through LPL Financial, Member FINRA/SIPC. Investment Advice offered through HD Wealth Strategies, a registered investment advisor and separate entity from LPL Financial.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
All indices are unmanaged and may not be invested into directly. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.
Stock investing involves risk including loss of principal.
