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2019 Q1 Commentary


Full Transcript:

Welcome to this edition of Custom Wealth Management Quarterly Commentary, I’m John Enright and I’m here to recap the first quarter of 2019. 

We all welcomed the New Year as an opportunity to say goodbye to the worst December in the US Stock market on record1.  Many expected the markets to continue their decline as it seemed to spare none in the equity markets, whether domestic or foreign.  The markets worked to price in the expected reduction in corporate earnings, softer global growth, political uncertainty and tighter monetary policy.

The markets remain difficult to predict – it’s analogous to predicting human behavior, which is perhaps the greatest influencer of market performance.  The resilient investor prevailed in January and February, bringing a substantial turnaround in the markets, both domestic and foreign.  March results were much more subtle, with less than a 1% gain in most major indexes4.  The 4th quarter downturn brought valuations to a level where many investors regained confidence.  However, when looking at money flows, most investors did not share in the recent market increases considering equity flows2.  

In a piece titled Top Money Managers Warn of 2019 Risks from WealthManagement.com, 11 well respected individuals were interviewed3.  Near consensus exists on the attractiveness of Emerging Markets while the opinions on fixed income and US Equities range from a pessimistic to an optimistic outlook.   Little agreement amongst the top money managers in the industry is nothing new and reassures us of the need to stay diversified, yet not diluted, and diligent in our efforts to identify quality managers to assist in meeting your financial goals.

We were quite active in our trading to fixed income in February and continue to look for opportunities to deploy cash with a primary focus on opportunities in the International and Emerging Markets.   Given continued expectations for volatility, we also find good reason to maintain the defensive allocations in funds which tend to experience lower volatility. With the recession radar constantly alert in the United States and negative interest rates in the Euro, resilient investors may continue to prevail regardless of the headwinds.  

REITS were the strongest performing asset class in the first quarter with a whopping 17.2% climb4.  Cash, while much stronger than even 2017, returned at 0.6% for the quarter.  In recent weeks mortgage rates ended their recent climb and have settled back just in time for what could prove a very strong spring market for home sales.   With a 10-year Treasury below 2.5% and the Fed giving every indication of no action for the year, we may be enjoying the reduced mortgage rates for longer than expected.  

We may have experienced the majority of 2019 gains in the first quarter, especially considering the pace of returns realized in January and February.  As always, our efforts will consistently be to manage through the business cycle and manage risk while still seeking strong results.  While downturns and upturns might come in very short spurts, our philosophy remains to manage toward your longer-term financial objectives.   Please feel free to reach us with any questions you may have, and we look forward to connecting with you soon.

These are the opinions of me, John Enright, and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Past performance is no guarantee of future results.



Resources:

  1. Isidore, C. (2019). 2018 was the worst for stocks in 10 years. [online] CNN. Available at: https://www.cnn.com/2018/12/31/investing/dow-stock-market-today/index.html [Accessed 2 Apr. 2019]. 
  2. Lebovitz, D. (2019). Have investors participated in the stock market rebound? - J.P. Morgan Asset Management. [online] Am.jpmorgan.com. Available at: https://am.jpmorgan.com/us/en/asset-management/gim/adv/insights/have-investors-participated-in-the-smr [Accessed 2 Apr. 2019].
  3. Gittelsohn, J. and Stein, C. (2019). Top Money Managers Warn of 2019 Risks. [online] Wealth Management. Available at: https://www.wealthmanagement.com/equities/top-money-managers-warn-2019-risks [Accessed 2 Apr. 2019].
  4. Am.jpmorgan.com. (2019). [online] Available at: https://am.jpmorgan.com/blob-gim/1383452890099/83456/weekly_market_recap.pdf [Accessed 2 Apr. 2019].


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