My November market update has been a little slow to develop because, well, I’ve been waiting for things to develop. I really feel like I could photocopy last month’s update and send it back out. We’re still talking about politics and trade wars, but it seems as though the general sentiment is a bit more positive, especially as expectations for an uptick in earnings growth for 2020 starts to be calculated.
Positive sentiment is a double-edged sword, though. It’s hard for markets to move higher if everyone has already bought in. For that reason, I expect the market to be somewhat range-bound, and to maybe even have a slight pullback before resuming its upward trend.
A big driver for the markets over the past couple of months has been the direction of interest rates. Since the 10-year Treasury bond hit a low of about 1.43%, it has raced back up to 1.83%, a huge move for bonds in a 2-month period. As it rose, it lifted a lot of lagging stocks with it, especially banks and other financials, which really needed a boost.
Earnings for the third quarter are mostly in, and results were generally better than expected. Still, corporate earnings are expected to end 2019 only about 1% higher than they began the year. 2020 looks like an improvement, with earnings expected to rise about 10%. I suspect that is a lot of the reason that stocks have had the recent rally, with the S&P 500 Index up over 4% already in the 4th quarter (as of November 15). The end of the year is, on average, the best season of the year for stock prices, too. That doesn’t always happen, though, and you don’t have to go back any further than last year to witness that exception.
My position right now is patience. I do expect this bull market–the longest in history–to continue. But there may be a pullback in the market, and there’s almost always a pullback in an attractive stock somewhere, and I hope to use those opportunities to put some cash to work for our clients.
In the meantime, I’d like to give you some homework. If you’ve had capital gains or losses elsewhere, possibly from other brokerage accounts or the sale of property, please check with us to see if we can offset that with gains or losses from your accounts here. Mutual funds will be distributing gains in the 4th quarter, and we’ll be working hard to try to offset those here. Frankly, though, there aren’t many losses left to take, so gains may be pretty high in 2019.
From the investment planning team at Signature Wealth, we hope you have a wonderful Thanksgiving. I always really enjoy it, and I’m looking forward to Thanksgiving this year, too. As a reminder, our office will be closed on Thanksgiving Day, and we close at 1:00 on the day after Thanksgiving.
As always, these opinions are mine, and may or may not be the same as those of Raymond James. This is not a solicitation to invest, although we do invite you to review your portfolio with us to see if any changes should be made.
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