A Look Back at 2019
Going back to the beginning of the year, most analyst were pessimistic thinking the markets would continue the decline that began September 20th, 2018 and ended Q4 with a negative -13.97%. However, that is not how the year turned out. Instead, the markets rallied and as of Thursday’s market close, the S&P 500 is up 27.86% YTD.
In our Quarterly Commentary published in early January, we advised our clients that even though we had just experienced a bad quarter, the data suggested to stay the course. We Wrote, “So, what is our message for 2019? This is not the time to play “defense” or sell your investments. What is most important is to stay the course of your personal financial and investment plan; if nothing has materially changed in your unique circumstances, then sticking to the game plan that was developed with your financial advisor is the best thing to do.”
Robert Luna, Surevest CEO & Chief Investment Strategist, told our readers:
Many of you have asked over the past few years about putting additional money to work or increasing risk exposure. My message consistently has been let’s wait for a better opportunity. Well, that opportunity has arrived. I know that you hoped it was delivered under a more soothing and optimistic backdrop, but unfortunately it never is. The fear, panic, and frustration you are hearing is what real opportunity sounds like. Clients who have been with us since 2002 can count just 2-3 times, in which we have spoken about being more aggressive or looking within your personal balance sheet, to see if there’s a way that you could allocate more capital to your portfolios. Each of those times has felt a bit like this one.
For those clients that followed Robert’s advice, they were rewarded with a strong year in the markets. Robert states very clearly that he does not have a crystal ball, but that he relies on fundamental metrics, such as the forward price-to-earnings ratio. After the selloff in Q4 2018, the forward 12-month P/E ratio on the S&P 500 was below its 5-year and 10-year average; therefore, making it attractive to invest in the market.
Now, the forward P/E ratio on the S&P 500 is at 17.8x, which is a little bit higher than the 5-year and 10-year average. However, as we wrote in last week’s Market Update, this ratio is not overstretched, so we are not concerned. Nevertheless, we will continue to monitor the data as it becomes available and navigate through the investment environment to help our clients achieve their financial goals.
This Market Update is our last one for 2019. We will resume our weekly commentary on January 3rd, 2020. We thank you for your trust in our team and wish you and your family a Happy New Year!