With the tail end of summer in clear site, it took me longer to complete this quarterly commentary than I had hoped. But, I did get to enjoy some family time on Canandaigua Lake and will get to enjoy more time there as we head into the last week of August and Labor Day. I hope you’ve enjoyed Summer at least as much as we have!
The old saying “sell in May and go away” came about as a result of many in the financial industry taking summer off and going away for a couple months. Somehow, it turned into the idea that the markets didn’t do that well during the summer. And, while occasionally true, it’s more common that the markets continue an upward trend over the summer. As a matter of fact, if you had “sold in May and gone away” you would have sold in a month that realized a 6.58% decline in the SP500. June would have proved a good time to stay invested as the SP500 realized a 6.89% increase, followed by 1.31% in July1. Truly a year that would have proved beneficial to stay invested!
All that said, the markets seem determined to present with volatility. Vanguard issued their 10-year outlook for stock and bond markets in late May and forecasted a 4-6% return for US equities, 2.5-4.5% for US bonds, 7.5-9.5% for International Equities and 2-4% for International Bonds2. While the last decade has proven a very strong decade for US Equities, it seems many are predicting a lower return for the following decade. This is reminiscent of the strong US performance throughout the 90s followed by the “lost decade” at the start of the 2000s. International equities outperformed the SP500 in all but 3 years from 2001-20103. Could we see a similar fate for equities in the coming decade? Time will tell.
Our philosophy remains one that recognizes the markets are difficult, if not impossible, to predict and we’ll continue maintaining diversified portfolios with an emphasis on overweighting to undervalued markets.
Other noteworthy news includes the potential passing of the “Setting Every Community Up for Retirement Enhancement Act” (The SECURE Act). This is the first major retirement plan legislation since 2006 and brings a significant amount of change to retirement plans. One of the more positive changes is an increase in the age for Required Minimum Distributions from age 70 ½ to age 72 (with the Senate also considering age 75).
On the negative side, the Act will have a big impact on planning for clients with substantial retirement account balances who intend to leave those assets to loved ones and spread the distributions out over the loved one’s lifetime. Instead, the Act requires those distributions to be distributed over a 10-year period. The bill hasn’t yet passed the Senate and given the packed schedule they face, it may end up in limbo until after the 2020 election. For more on the secure act, feel free to reach out to us.
Thanks for taking time to enjoy our quarterly commentary and feel free to share it with others. Until next quarter, have a wonderful end to your Summer!!
- Ycharts.com. (2019). S&P 500 Monthly Return. [online] Available at: https://ycharts.com/indicators/sp_500_monthly_return [Accessed 8 Aug. 2019].
- Arvedlund, E. (2019). Vanguard issues 10-year forecast for stock, bond market returns. [online] https://www.inquirer.com. Available at: https://www.inquirer.com/business/vanguard-stock-bond-forecast-10-year-annual-returns-inflation-fed-20190522.html [Accessed 8 Aug. 2019].
- Callan.com. (2019). [online] Available at: https://www.callan.com/wp-content/uploads/2018/03/Callan-PeriodicTbl_Collection_2018.pdf [Accessed 8 Aug. 2019].