News & Insights
YorkBridge Fourth Quarter Commentary
We hope that everyone had a wonderful holiday season with family and friends. As the calendar turns and we begin to focus on our goals for 2020, it is important to take a moment to reflect on the year that was. 2019 serves as a reminder that much can change over the course of a year. Last December, investors watched as the S&P 500 dropped roughly 19% and fell within a whisker of a bear market. Expectations were for the Federal Reserve to continue to hike interest rates with the potential to stymie growth. Investors believed the bull market that started in March 2009 was finally coming to an end. Instead the Fed reversed course and cut interest rates on three occasions fueling strong returns across almost all asset classes. Equities closed the year up 31.49% & 31.02% (including dividends) as measured by the S&P 500 and Russell 3000 (a more broad US based Index). Fixed income as measured by the Barclays US Aggregate Index, finished up a resounding 8.72%. A level of performance not seen since 2002. A balanced portfolio of 60% equities and 40% fixed income returned 22.10%*.
Without laboring the market’s course over the entire year, it was in essence a sequence of three important forays into new high ground. First, it made up all of 2018’s drawdown, and broke out at the end of April to a new high. It then corrected sharply in April, driven by one of President Trump’s tweets regarding China. Another series of new highs followed in June-July, and consolidated into the fall. The third and most dramatic breakout took place at the end of October and continued through year-end.
These three successive waves of new highs grew from a slow realization that widespread fears of major disaster—trade wars tipping the economy into recession, a significant year-over-year downtick in earnings, and a constitutional crisis regarding impeachment—were overblown. This was particularly true, with respect to the late October breakout and the virtual melt-up that followed.
As we enter into 2020, the bull market is now in the longest expansion on record. Naturally, this leads one to ask, how much longer can it last? Our expectations are for more muted returns in 2020 against a backdrop of modest U.S. GDP and profit growth; accommodative monetary policy by the Federal Reserve and other major central banks; and a possible pickup of economic activity in both Europe and China (assuming trade rhetoric remains subdued). Though major economic indicators in the U.S. have been slowing over the past 12 months, they remain solid led by a historically low unemployment rate and on the strength of the American consumer. While these factors lead us to believe that a recession in 2020 is unlikely, there are several uncertainties that remain.
Though it is reasonable to assume that an initial trade deal between the US & China is signed, there is no guarantee that the same protectionist rhetoric that jolted the markets in 2019 won’t return. Also, on the horizon we expect a polarizing US presidential race, further Brexit uncertainty, high corporate debt levels, and additional unexpected geo-political developments that are all likely to test investor’s nerves throughout the year.
The fact is that goal-focused, planning driven investors had an exceptional year in 2019. We did so not by forecasting this year’s returns nor by jumping into the market just in time to get them but by patiently hewing to our long-term investment discipline. With that said, it is fairly certain that unforeseen events and uncertainties that shaped returns in 2019 will undoubtedly carry into 2020.
While asset class returns have been consistent over the longer term, they are unpredictable in any one-year period. In light of this unpredictability, it is of utmost importance that investors own well-diversified portfolios tailored to their specific risk tolerance and investment objectives. Long-term investment success comes with this principal of goal-focused and planning-driven investment advice.
*Assumes an allocation of 60% Russell 3000 & 40% Barclays US Aggregate
The Information Contained In This Document Is Based On Data Received From Third Parties Which We Believe To Be Reliable And Accurate. YorkBridge Wealth Partners, LLC Has Not Independently Verified The Information And Does Not Otherwise Give Any Warranty As To The Truth, Accuracy, Or Completeness Of Such Third Party Data, And It Should Not Be Relied Upon As Such. Any Opinions Expressed Herein Are Our Current Opinions Only. YorkBridge Wealth Partners, LLC Is An SEC Registered Investment Adviser Under The Investment Advisers Act Of 1904 (“Advisers Act”). Registration Of An Investment Advisor Does Not Imply Any Specific Level Of Skill Or Training. The Information Contained In This Document Is To Assist With General Planning. Please Consult With Your Own Tax Advisor And Attorney For More Specific Information.