“Being the best is great. You’re number one. Being unique is greater. You’re the only one.” Anonymous
The financial media has been at it again. Preaching doom and gloom. Speculating that GDP and earnings would start to decline and the 10 year old market advance is over.
I don’t think they remember how the S&P 500 dropped in 2011, 2015 and last year, the 4th quarter decline topped 19%. All of these declines put us on the edge of our seats, but subsequently recovered. Why? Earnings and the economy continue to climb higher.
Times of market volatility can often trigger emotional responses in investors, responses that can impact judgement and potentially affect long-term plans. Too often, investor emotion follows the ups and downs of the market. We’re exposed to an abundance of news, particularly economic news, via more outlets than ever before. 62% of Americans now get their news on social media. (Pew Research Center, 5/26/16) At times, it may feel overwhelming, as though we’re caught in a media whirlwind. This 24 hour news cycle provides an almost immediate record of what’s happening throughout the world. Everyone loves a good story—the more dramatic or sensational, the better it sells.
Remember March 9, 2009? The market bottomed out that day, with the S&P 500 hitting 676.53 points, since then, the benchmark index has climbed about 309%. The bull market has added a record $20 Trillion to share values, but it hasn’t been without speed bumps. Late last year, the S&P 500 fell 19.8% on concerns (Hedge fund liquidations) over interest rates, the global economy, and the trade war. How long can it last? This bull market has earned the title of longest on record, which makes any good skeptic wonder how long we’ve got left.
The FED anticipates 2.4% GDP growth in 2019 and 2.2% in 2020 (The Conference Board Economic Outlook, 2019-2020). If the current economic expansion continues, it will be the longest on record. With over 2% GDP, the economy should continue to expand well into the future. Chairman of the FED, Powell, stated that signs already suggest the economy will move higher and is on solid footing. In part, the improved forecasts comes from the global outlook, where growth prospects are improving, China trade negotiations appear nearly complete, and concerns about Brexit have been put on hold with the delayed deadline date. (The FED)
Home building -876,000 single family homes began construction in 2018, the 7th year of increasing home starts since this measurement bottomed at 431,000 in 2011. The All-time US record for home starts in a single year: 1.72 million in 2005 (source: Census Bureau).
Earnings growth for S&P companies averaged 25.6% in the first three quarters of 2018, but that growth stumbled to 13.4% in the 4th quarter. In the first quarter or 2019, the S&P 500 is reporting a year over year decline in earnings of - 2.3%, but year over year revenues of 5.1%. Remember we had over 20% growth in the 1st quarter of 2018. All the numbers are not in, but we will report them in the next month or so. Consumer Discretionary and Information Technology sectors were mainly responsible for the decrease in the overall earnings decline for the 1st quarter. Analysts project higher earnings growth for the 2-4th quarters of 2019.
The secular bull market which commenced on March 9th, 2009, remains firmly intact. Investors are witnessing the second leg of this great bull market that began in February, 2016 which is always the longest and strongest as it is driven by improving economic conditions caused by the monetary stimulation of years past. Since the first leg lasted nearly 7 years, despite the black headlines and the widespread fear, the current leg remains relatively early.” (Lowery Research Organization) The 13 largest stocks in the S&P 500 make up 25% of the total stock market capitalization of the S&P 500 index as of the close of trading on 4/05/2019. (S&P) Most of those stocks are in the tech sector, this will be an issue that we’ll continue to watch.
As always, I’m honored and humbled that you have given me the opportunity to serve as your financial advisor. I’m here to assist you and to answer any questions you might have in regards to financial planning, the markets or walk through any issue that concerns you. As always, thank you for the relationship and trust.
Harry S. Williamson, WMS
Vice President, Investments
Financial Advisor
Any opinions are those of Harry Williamson and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or
Forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Past performance does not guarantee future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions.
The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S .stock market.
The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stocks of companies maintained and reviewed by the editors of the Wall Street Journal.
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