Broker Check

2019 Review

 and Looking Forward to 2020


By:  James C. Denton, CFP®, Managing Partner

January 8, 2020


2019 was the best year we’ve had in a while, in fact since 1997 by some measures, with gains in the 20 to 40% range depending on which index you want to cite.  In summary, this was the kind of year that rewards the patient and disciplined investor who accepts the long and sometimes scary flat and down periods as a deposit against the sudden, unexpected, and occasionally explosive gains that the market can deliver from time to time.


I expect the market has gotten a little ahead of itself, (the technical term is “over-bought”) and I wouldn’t be surprised to see a little bit of a pullback in the next few weeks.  The resilience of investor sentiment right now is a bit troubling, witness the muted reactions to the Iran saber rattling of the last few days.  I don’t necessarily see the euphoria that is typical of a major market top, but a little fear in investor sentiment would not be a bad thing, and a solid correction would probably be beneficial to add a little perspective.  Absent a major geopolitical event, however, there is not much on the horizon to suggest anything worse than a garden variety 5 to 10% correction. 


Many analysts are predicting, and history supports the premise of positive returns of 6 to 9% for 2020 and that seems to me to be a reasonable expectation.  Corporate earnings continue to meet or exceed limited expectations.  Likewise, gross domestic product (GDP), while not achieving the 4% target the President has suggested, does on balance exceed the ~2% trend of recent years which many economists had come to see as about the best we could expect.  This is technical stuff to be sure, but the bottom line is the US economy is exceeding expectations with respect to productivity, employment, interest rates, and inflation.  Trade war fears have been back-burnered at least for the time being, the talk of recession has abated, and the Fed is on the sidelines.  Some like to hyperventilate about the impeachment hearings, more in the press than in the public, but I don’t see that as a market turning event.


As we progress through the year, you will be inundated with election negativity, and this is the question I get the most often, both from you and in idle conversations with non-clients seeking free advice.  “Who do you think will win?”, and “What’s going to happen if (fill in the blank) gets elected?”  Let’s delay that conversation until the herd thins a little and we have a clearer picture of who the nominees are likely to be.  In the meanwhile, I would remind you that in 2016, everyone was sure that Hillary was going to be elected, but if Trump did win, the market would surely crash.  How did that turn out?  Historically market performance tends to be much more volatile leading up to elections, but much more orderly and usually positive after the votes are counted.  The market is much more unsettled by uncertainty than it is by Donald Trump or Bernie Sanders.  IMHO there are some really scary possibilities this time around, but let’s not worry too much until we know we need to.  Many of the current posers will self-destruct over the next few months, a nominee will emerge, and his or her policies, programs, proposals, etc., will in all likelihood, shift a bit away from the extremes we are currently hearing about as she starts to be more concerned about being elected, than about getting the nomination.


In the meanwhile, and this is not news to anyone who follows my musings, altogether now, “STICK TO YOUR PLAN”.  A reasonable balanced portfolio reflecting your current situation and your long-term goals and objectives is the proper strategy now and in the future.  While some minor tweaking of holdings, rebalancing of allocation and review and analysis of strategy is proper and prudent, making major portfolio adjustments in response to or in anticipation of short-term events or even worse, your fears about what the future may hold rarely turns out well. 


Once again, Stick to Your Plan.  And if you have questions, concerns, observations, just something that needs to be said, talk to me.  I’ll be glad to hear from you. 



The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by LPL Financial. The material is for informational purposes only. All performance referenced is historical and is no guarantee of future results.

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.

This information is not intended to be investment advice for any individual.  You should consult with your personal investment advisor before making any decisions based on this material.