January Commentary

Wade’s January, 2020 Market Comments

‘The stock market can remain irrational longer than you can stay solvent.’ John Maynard Keynes Economist

 One year ago, we had witnessed the ‘Christmas Eve 2018 Crash’ sending US stocks down 20%. By historical average, the Trailing Price to Earnings still sat at 19 times earnings, or about 15% above normal after that decline. I believed that US companies earnings would decline in 2019 and interest rates would go up making it a difficult 2019 for both stocks and bonds.

 Happy New Year 2020! Looking back on 2019, earnings of US Companies declined 1% according to WSJ Dec 30, 2019 p. B6. Even though earnings disappointed, US Stocks (IVV) climbed 30%! This creates an historically overvalued US Stock market by about 40%.

 Interest rates surprisingly declined in 2019 with the US Federal Reserve Bank lowering rates to stimulate the US economy in light of Presidential Impeachment talk and Trade Wars. This helped bonds climb 8% (AGG).

 Our ‘risk off’ portfolios strategies did well taking on far less risk than the overall stock and bond markets. 

 2020 looks like more of the same in my opinion. Slow earnings growth of 10% for US Companies should make further advances difficult. However, I do expect a quick rise in US Markets early in 2020 as investors jump in the irrational market.

 In my opinion 2020 US and Global interest rates might be held down for 1 more year with Global Central Banks ‘printing money’ at a near record pace. 

 After the US Election in 2020, markets, in my opinion, might ‘correct’ to much lower stock prices and much higher interest rates. 

 I still like preferred Stocks of Utilities and Financial Companies, energy companies and investment grade municipal bonds. Opportunities seem to be rising overseas as the US Dollar begins a slow decline over the next year.

 Disclosure: The information and opinions presented here are those of Wade McFee and are for general information only and are not intended to provide specific advice or recommendations for any individual. The opinions, views and information expressed in this commentary are subject to change without notice based on market conditions and other factors. You should contact your investment representative, attorney, accountant or tax advisor with regard to your individual situation.