October 2019 Newsletter to Clients

Enjoy this month’s edition that features a review of the last 12 months of the stock market.

Market Update: “Are you ready for the next bear market?” is the lead question on a radio spot I’ve been hearing for about 2 years now. I chuckle every time I hear it, not because we shouldn’t be prepared, but because the speaker seems to be practically yearning for a bear market. In fact, his question reminds me of the local weather person breathlessly anticipating the 30% chance of a thunderstorm.

As our clients, you know that we’re not market timers. By that we mean we invest your portfolios for your long-term goals and for your unique circumstances and needs. We don’t change your strategy based on what we think the market might do or, especially, what we hope the market might do. Incidentally, we believe we’re in good company when Warren Buffett says he too never tries to time stocks. “I never have an opinion about the market”, he says, “because it wouldn’t be any good and it might interfere with the opinions we have that are good.”

Here is some 2018 stock market history that might help illustrate our point:

• Last year at this time, the beginning of the 4^th quarter, the stock market, as measured by the S&P 500, was up 9% on the year. Furthermore, the mood about stocks and the economy was upbeat.
• Then in October the S&P 500 plunged 7% and kept going down.
• The S&P 500 finished the year with a total return of -4.39%. As total returns include dividends, the actual price drop of the S&P 500 was even more dramatic than that.
• This marked the first time EVER that the market ended with a loss after being positive for the first three quarters.

Here is what followed in 2019, so far:

• As of this writing, the S&P 500 has a total return of almost 20% for 2019. Just as very few saw or predicted the 2018 last quarter tumble, the overall mood was bearish for 2019.
• Looking at the last 12 months performance, the S&P 500 has returned 3.72%. Quite a roller coaster ride if you’re into those kinds of thrills.
• Looking deeper, small stocks as measured by the S&P SmallCap 600 is down 10.25% over the last 12 months.
• Conversely, the U.S. Aggregate bond index is up 10.27% over the last 12 months.

This data is a good example of why we diversify yours and our portfolios – when one category zigs, another usually zags.

As always, the news is full of noise about subjects such as the trade war, impeachment inquiry, Hong Kong unrest, Brexit, and on. While these topics are important, no one, even Warren Buffett, knows what impact, if any, they will have on the stock market and our investments. Headlines, however, don’t guide our investing strategies. Data, conversations with the managers of the funds we invest in, additional data, and your specific needs and timeframe guide what we do for you.

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.