- 2019 market appreciation was all about P/E multiple expansion instead of earnings growth. For decent market returns we need to see accelerating earnings growth… The multiple is an expression of hope; earnings are reality.
- The Fed cut rates in 2019, without which your returns would have likely been much lower. This year the Fed is on hold… It’s all about earnings growth.
- Companies buying their own shares (Share repurchases) make earnings growth look stronger without improving fundamentals. In the past 5 years the top 20% of companies have repurchased $975 billion of stock, equal to $381,000 per employee… Great for shareholders but not for economic growth. 2019 was a banner year for share repurchases, without which we would have had an earnings recession.
- Trade War caused weaker-than-expected industrial spending on things like factories & machinery. A trade truce should boost capital spending in 2020.
- 0% yielding bonds: in 2019, 1/3 of all bonds globally had negative yields. This causes foreign investors to buy higher yielding US bonds which will help keep interest rates low for the near future… another positive for the US consumer.
- Strong employment trends: 2019 saw record low employment & higher wages… Strong US consumer backdrop = a key reason to remain optimistic.
- Should I stay invested in the market? Yes, but with lower expectations. We prefer stocks over bonds, and bonds over cash.
- Will we experience a recession in 2020? No. Recessions are becoming less frequent for good reason. We are in the longest economic expansion since the Civil War, with the longest time between recessions and the longest period of consecutive job gains on record.
Need help? Call me. 740-446-4200.
Stanley K. Evans, CRPC®, AIF®
Chartered Retirement Planning Counselors℠
Accredited Investment Fiduciary®
Registered Investment Advisor
FINRA Dispute Resolution Arbitrator
300 Second Ave, Ste D
Gallipolis, OH 45631
(740) 446-4200 – Phone
(614) 595-1156 – Cell