“Peek of the Week”
Market Commentary
December 23, 2019
The Markets
Let’s hear it for 2019!
Major stock indices in the
United States and overseas are poised to deliver double-digit gains for the
year. Even with uncertainty about Britain’s exit from the European Union (EU),
the FTSE 100 boasted a gain of more
than 10 percent at the end of last week. That’s not bad for a year which
included (in the United States) an inverted yield curve, an earnings recession,
and a contentious trade war.
The strong stock market
performance of 2019 owes a lot to central banks, and so does the performance of
the bond market. Reuters reported,
“…the
screeching change of direction by the world’s top central banks, led by the
Federal Reserve, which cut U.S. interest rates for the first time since the
financial crisis more than a decade earlier…fired bond markets up like a
rocket. U.S. Treasuries, the world's benchmark government IOU, have made a
whopping 9.4 percent after yields plunged as much as 120 basis points…German
Bunds – Europe's safest asset – have had their best year in five years, making
roughly 5.5% in euro terms as the European Central Bank has reversed course
too.”
So, what lessons should we
take from 2019?
Perhaps, we should try to
come to terms with loss aversion. When you make an investment decision, it’s
important to consider the impact of loss aversion on your thinking. The pain
from a loss carries twice the impact of the pleasure from a gain. As a result,
fear of loss may affect investment decision making.
2019 offered a great example.
During a year of exceptional returns, investors pulled money out of stocks at a
record pace because they were worried about recession and other issues. Axios
reported,
“Data
from the Investment Company Institute shows money has been pulled out of [stock
investments] in every month this year except January. In total, more than $130
billion has been drawn from [stock investments] in 2019, making it already the
largest year of outflows on record.”
When it comes to investing, uncertainty
is normal. It is part of investing. Tolerating uncertainty may help investors
earn attractive returns. As a result, our advice is to stay invested even when
uncertainty makes you nervous, even when markets are falling.
If you have a diversified
portfolio built to help you reach your goals, stay with it, unless you risk
tolerance has changed. In 2019, pulling money out of stocks meant some investors
missed out on some exceptional returns.
Data as of
12/20/19
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500 (Domestic Stocks)
|
1.7%
|
28.5%
|
30.6%
|
12.4%
|
9.2%
|
11.2%
|
|
Dow Jones Global ex-U.S.
|
0.9
|
17.6
|
18.2
|
7.3
|
3.0
|
2.9
|
|
10-year Treasury Note (Yield Only)
|
1.9
|
NA
|
2.8
|
2.6
|
2.2
|
3.7
|
|
Gold (per ounce)
|
0.9
|
15.4
|
17.4
|
9.5
|
4.4
|
3.0
|
|
Bloomberg Commodity Index
|
1.2
|
4.8
|
2.0
|
-2.3
|
-5.6
|
-5.1
|
S&P 500, Dow Jones Global ex-US, Gold,
Bloomberg Commodity Index returns exclude reinvested dividends (gold does not
pay a dividend)
and the three-, five-, and 10-year returns are
annualized; and the 10-year Treasury Note is simply the yield at the close of
the day on each of
the historical time periods.
Sources: Yahoo! Finance, MarketWatch, djindexes.com,
London Bullion Market Association.
Past performance is no guarantee of future results.
Indices are unmanaged and cannot be invested into directly. N/A means not
applicable.
the secure act
may affect your retirement and your legacy planning… Last week, reports
indicated the ‘Setting Every Community Up for Retirement Enhancement’ (SECURE)
Act was attached to the federal spending bill President Trump signed into law
on Friday.
The SECURE Act is intended to expand retirement savings opportunities.
Many of its provisions make it easier for Americans to save more for retirement
and, also, to convert their savings into income for retirement. The Act will change
IRA rules in some significant ways. For instance, Drinker Biddle and Barron’s
reported:
·
Contribute to IRA accounts at
any age.
In the past, Americans had to stop contributing to IRAs at age 70 ½.
·
Begin taking required minimum
distributions (RMDs) at age 72. The age for RMDs was pushed to 72 from age 70 ½.
The Act also changes post-death IRA distribution rules, eliminating stretch
IRA estate planning strategies. Barron’s explained, “Under the bill,
beneficiaries of an IRA would need to draw down the account – and pay income
tax on the money – over a decade, rather than a lifetime.” This will affect
some legacy planning strategies and necessitate the adoption of alternative
solutions.
Workplace plans may change, too. Part-time workers are now eligible to
participate in defined contribution plans as long as certain criteria are met.
The Act also made it easier for defined contribution plans of all sizes to add lifetime
income options to plan investment lineups.
In addition, the incentive for smaller business owners to establish
workplace retirement plans increased. Tax credits, of up to $5,000 for three
years, can be claimed to offset plan start-up costs. Additional tax credits are
possible when new plans include automatic enrollment features or existing plans
add automatic enrollment features.
If you would like to discuss how the SECURE Act may affect your
retirement, business, or legacy plans, please give us a call.
Weekly Focus – Think About It
“I feel
that one of the most important lessons that can be learned is that what we ‘see’
may be different than what is actually in front of us.”
--Mark Singer, Journalist [8]
Best regards,
Leif
M. Hagen
Leif M. Hagen, CLU, ChFC
LPL Financial Advisor
Leif M. Hagen, CLU, ChFC
LPL Financial Advisor
P.S. Please feel free to forward this commentary
to family, friends, or colleagues. If you would like us to add them to the
list, please reply to this email with their email address and we will ask for
their permission to be added.
Securities
offered through LPL Financial, Member FINRA/SIPC.
*
These views are those of Carson Coaching, and not the presenting
Representative, the Representative’s Broker/Dealer, or Registered Investment
Advisor, and should not be construed as investment advice.
*
This newsletter was prepared by Carson Coaching. Carson Coaching is not
affiliated with the named firm.
*
Government bonds and Treasury Bills are guaranteed by the U.S. government as to
the timely payment of principal and interest and, if held to maturity, offer a
fixed rate of return and fixed principal value.
However, the value of fund shares is not guaranteed and will fluctuate.
*
Corporate bonds are considered higher risk than government bonds but normally
offer a higher yield and are subject to market, interest rate and credit risk
as well as additional risks based on the quality of issuer coupon rate, price,
yield, maturity, and redemption features.
*
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities
considered to be representative of the stock market in general. You cannot
invest directly in this index.
*
All indexes referenced are unmanaged. The volatility of indexes could be
materially different from that of a client’s portfolio. Unmanaged index returns
do not reflect fees, expenses, or sales charges. Index performance is not
indicative of the performance of any investment. You cannot invest directly in
an index.
*
The Dow Jones Global ex-U.S. Index covers approximately 95% of the market
capitalization of the 45 developed and emerging countries included in the
Index.
*
The 10-year Treasury Note represents debt owed by the United States Treasury to
the public. Since the U.S. Government is seen as a risk-free borrower,
investors use the 10-year Treasury Note as a benchmark for the long-term bond
market.
*
Gold represents the afternoon gold price as reported by the London Bullion
Market Association. The gold price is set twice daily by the London Gold Fixing
Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy
ounce.
*
The Bloomberg Commodity Index is designed to be a highly liquid and diversified
benchmark for the commodity futures market. The Index is composed of futures
contracts on 19 physical commodities and was launched on July 14, 1998.
*
The DJ Equity All REIT Total Return Index measures the total return performance
of the equity subcategory of the Real Estate Investment Trust (REIT) industry
as calculated by Dow Jones.
*
The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an
index representing 30 stock of companies maintained and reviewed by the editors
of The Wall Street Journal.
*
The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ
system.
*
International investing involves special risks such as currency fluctuation and
political instability and may not be suitable for all investors. These risks
are often heightened for investments in emerging markets.
*
Yahoo! Finance is the source for any reference to the performance of an index
between two specific periods.
*
Opinions expressed are subject to change without notice and are not intended as
investment advice or to predict future performance.
*
Economic forecasts set forth may not develop as predicted and there can be no
guarantee that strategies promoted will be successful.
*
Past performance does not guarantee future results. Investing involves risk,
including loss of principal.
* The foregoing information has
been obtained from sources considered to be reliable, but we do not guarantee
it is accurate or complete.
*
There is no guarantee a diversified portfolio will enhance overall returns or
outperform a non-diversified portfolio. Diversification does not protect
against market risk.
*
Asset allocation does not ensure a profit or protect against a loss.
*
Consult your financial professional before making any investment decision.
*
To unsubscribe from the “Peek of the Week,” please reply to this email with
“Unsubscribe” in the subject line or write us at: Hagen Financial Network, LLC.;
4640 Nicols Road Ste 203; Eagan, MN 55122.
Sources:
https://www.barrons.com/market-data?mod=BOL_HAMNAV (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/12-23-19_Barrons_Market_Data.pdf)
https://www.barrons.com/articles/the-s-p-heading-for-best-year-since-2013-what-fueled-the-rally-51576891986?mod=hp_DAY_3 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/12-23-19_The_S%26P_Is_Heading_for_Its_Best_Year_Since_2013.pdf )
https://www.barrons.com/articles/navigating-the-secure-act-what-retirement-savers-need-to-know-to-optimize-their-401-k-s-and-iras-51576886142?mod=hp_LEAD_3 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/12-23-19_Navigating_the_Secure_Act_What_Retirement_Savers_Need_To_Know_To_Otimize_Their_401ks_And_IRAS.pdf)
https://www.fool.com/retirement/general/2014/08/31/5-retirement-quotes-to-make-you-a-smarter-investor.aspx
Photo by Austin Distel on Unsplash
Photo by Austin Distel on Unsplash
