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1.   Domestic equities’ performance in Q1 was the best in nearly 10 years.

 

2.   Favorable interest rates plus a potential China trade resolution have driven much of this year’s equity rally.

 

3.   The Fed’s pivot to a more dovish monetary policy drove U.S. bonds higher.

Executive Summary

  • The question for stocks in 2019 isn’t whether earnings will slow, it’s by how much.
  • During such slowdowns, the evidence shows that not all stocks are equal.
  • Tilting towards more defensive stocks during earnings slowdowns can be beneficial to one’s portfolio.

 

 

1.   We find little evidence of excess in the economy that usually results in a recession, and this gives us reason to think the next recession is still some time away.

 

2.   The investment markets are re-pricing for a slowdown in economic growth, but absent a recession, the bull market is likely to resume.

 

3.   Non-U.S. stocks and value stocks offer some attractive opportunities given their respective cycles.

January High-5 from Janiczek

A  monthly recap of articles designed to inform and inspire on a variety of topics related to investing and wealth management. 

In this edition:

  • 2019 Outlook / 2018 Top Takeaways and Market Review
  • Investing in Volatile Markets
  • Wealth & Health in 2019
  • More Freedom in 2019
  • All for One, One for All

  1. Ten years after the 2008 market meltdown, U.S. equities are up over 200% and posting fresh new all-time highs.
  2. Higher interest rates during the quarter presented some headwind for bond investors, but bonds can still generate decent returns within a long-term trend of higher interest rates.
  3. The underlying economy boasts plenty of strength, with economic growth during the rest of 2018 expected to remain above 3%.

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WATCH VIDEO (04:35)»

 

MLPs May Increase Portfolio Performance

Owning oil and gas pipelines can add octane to a portfolio’s performance, particularly in today’s energy and economic backdrop.

It’s our job to help clients gain the proper exposure to safety, market and aspirational asset categories. It’s also our job to identify pockets of the market that, when available, have attractive fundamentals and/or characteristics worth considering. Oil & Gas MLPs in the midstream space (storing and transporting energy) has caught our interest for years and remain an asset class of interest. While we take care of researching and handling the details for our clients, it doesn’t hurt for you to pipe into the conversation. Here’s a quick primer on the space.

Long-term strategies may challenge investors to stay focused. The fight against short-term thinking is getting harder as we accomplish so many things with increasing ease and speed.

There is more computing power in an iPhone than what NASA had during the first landing on the moon. Remember when Netflix mailed DVDs to your home? Now we can stream just about anything to our smartphones. And what would you have said ten years ago if I had told you the President of the United States’ main communication tool in 2018 would be Twitter?

But speed doesn’t change everything.

One asset class has rebounded to new all-time highs — U.S. small cap stocks.
Comparison of S&P 500, Russell 2000, Emerging Markets and Int'l Developed Indices

After a bullish 2017 and hopes of a continued global equity melt up, 2018 has instead reintroduced market volatility. Despite global market volatility, U.S. small cap stocks have rebounded to new all-time highs.

Factors influencing the success of U.S. small cap stocks

So what factors has caused this success versus larger capitalization stocks?

I’m not sure Yogi Berra is big source of investment knowledge for most investors. But, that doesn’t mean his words of wisdom, “déjà vu all over again,” don’t apply.

Today’s Wall Street Journal included an article titled, “Value Investors Face Existential Crisis After Long Market Rally.” It discussed the “rut” that value investing has experienced since 2009.  No arguments there. Value stocks are down about 1% year-to-date while growth stocks are up nearly 8%.  The tech-heavy NASDAQ Composite Index, which holds many of the favorite tech names among growth investors, is at its all-time high.

A Familiar Scenario

But as I sipped my morning coffee and read further, I didn’t ask myself how we should change our current value approach (for the portion of our portfolios dedicated to value investing) to match the current environment.  Instead, I found myself thinking about earlier in my career, the late 1990s.  Tech ruled the day from 1995 through 1999, and value investors lagged back then too.

JUDGMENT UNDER UNCERTAINTY
Behavioral Economics Takes Center Stage in Q3

I will be very impressed if the title of this latest edition of Portfolio Matters sounds familiar to anyone. It’s actually the title of the research paper by Daniel Kahneman and Amos Tversky back in September of 1974 that brought the field of behavioral economics into the mainstream mindset we know today. (We credit writer Jason Zweig for bringing this anniversary into spotlight.)

What this research paper really did was to question our understanding of how we think, or at least, how we think we think. The paper shed light on powerful thought patterns that likely affect us all. And when it comes to investing, these thought patterns and resulting behaviors play a far greater role in the markets than most folks realize…read more


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