Hello and happy new year! I hope this finds you well! Today is Friday, January 17, 2020 and in about 5 minutes I will share a brief overview of 2019 and what we may be able to expect in this new year.
Let's start with what a difference a year can make! One year ago, the stock market was plunging and came extremely close to ending what has become the longest bull market ever recorded. In December of 2018, dropping stocks were suggesting that an increased risk of recession and/or market crisis might be on the horizon. Our confidence in investing fundamentals and commitment to be goal-focused and planning-driven helped us stay the course and maintain our long-term focus despite short-term volatility. Remember, investment failure comes from continually reacting to current events in the economy and markets.
Looking at 2019, the S&P 500 saw a drawdown over May and June, which lasted about a month, and took stocks down about 7%. Technically, this can't even be classified as a "correction" as the Index didn't close anywhere near 10% down, but something interesting happened: investors panicked. We saw US stock mutual fund and Exchange Traded Fund (ETFs) outflows soar to levels not seen since the Great Panic of 2008. I repeat: a one-month, 7% decline set off a flight from stocks not seen since the financial crisis. It is difficult for me to view this data as anything but a powerfully suggestive contrary indicator. There will be plenty of time to begin worrying when the stock market once again becomes cocktail party conversation, and everyone around us is excitedly positive.
Despite the fact that we now have clarity around some the the biggest market uncertainties like US/China trade relations, the Fed's interest rate policy, and Brexit, it is probable that some of the potential gains of 2020 were pulled forward to 2019, and that we will not match our results from last year. I will remind you that this is irrelevant. The only benchmark we should care about is the one that tells us if we are on track to accomplish our financial goals. It is also probable that fallout from the impeachment, international economic data, and the potential for a highly-charged U.S election could cause increased volatility. Let us remember that these market declines, while frequent, are ultimately temporary, and let's not act like the investing public that panicked back in May. Overall this year, we expect stock market gains.
Thank you so much for taking the time to watch this! I wish you and your family a healthy and prosperous New Year, and if you have any questions, please feel free to reach out!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance references is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
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.
Stock investing involves risk including loss of principal. Portions of this material have been prepared by LPL Financial LLC.
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