January 2019 Newsletter to Clients

Enjoy this month’s edition that features a review of the stock market performance of 2018, a note on BGT and a list of the 2019 IRS contribution limits on retirement accounts.

After experiencing an amazing 2017 that saw the stock market return over 19% with the least volatility in stock market history, 2018 jolted us back to the reality that the stock market doesn’t move straight up. 2018 saw the worst stock market performance since 2008, declining 6.24%.

Despite some pronounced up and downs, by September the S&P 500 had returned over 9% and was chugging along toward another wonderful year. Since then, as you undoubtedly know, the market has bounced around like a prop plane in a hurricane. Since that high in September the market dipped into negative territory in late October and November, only to rise back up over 5% again. Then, after dipping down to -12%, it increased 5% in one single day, only to end the year down 6.24%.

The stock market is sometimes described as a yo-yo on an up escalator: it goes up and down a lot but eventually reaches the next level. History bears that out. Some interesting facts about the stock market:

• The S&P 500 returned an average of 7.2% over the 20-year period from 1998 to 2017 (5,036 trading days).
• A hypothetical investment of $10,000 in the S&P 500 would have grown to $40,135 during that time span.
• If an investor tried to “time the market” and sell her stocks right before she thought the stock market would decline and, as a result, missed the 20 days with the biggest gains during that period, the average annual return would decline to 1.15%.
• So, a hypothetical investment of $10,000 in the S&P 500 while employing a market timing strategy that missed just the 20 biggest days would have grown to just $12,570 during that 20-year span - $27,565 less than simply staying the course.

What will 2019 bring? By any measurement, the economy is quite strong. Unemployment rates are extremely low and corporate earnings are quite good but the stock market looks to the future, not the current. Investors evaluate what price they are willing to pay for a share of a company’s future earnings and that picture is a bit more difficult to see. That uncertainty of the future is what is driving the volatility of the market since mid-September.

So, what to do? Stay the course. History shows a long-term view in investing is the wise choice. As you know, we work with each of you to structure your portfolio in order to accomplish your specific, individual goals.

BGT: Has announced a special distribution of $.0425 per share payable on January 9. This will be in addition to the normal distribution of $.0618 per share payable that same day. 

For those of you saving for your future, here are the new IRS limits for 2019:

• 401(k)s: $19,000
• 403(b)s and 457(b)s: $19,000 each
• Those 50 and over can contribute an additional $6,000 to each account
• Individual Retirement Accounts (IRAs): $6,000
• Those 50 and over can contribute an additional $1,000
• SIMPLE IRAs: $13,000
• Those 50 and over can contribute an additional $3,000
• SEP IRA: 25% of your net earnings from self-employment up to $56,000.

Thank you for your continuing confidence.

Past performance is no guarantee of future results. The opinions expressed are those of Moneywatch Advisors, Inc. and are no guarantee of the future performance of any particular fund. This information is for educational purposes only and is not intended as investment advice. Please consult your financial advisor for more detailed information or for advice regarding your individual situation.