Investments

2019 Financial Year in Review

By Dean Barber

January 3, 2020

2019 Financial Year in Review

Stick with me as I look at the 2019 financial year in review and what we see coming for 2020. A near-record year for the stock market! Housing starts are way up and consumer confidence way up. There are a lot of great things that happened in the last quarter of 2019. I have to say; we’re going to be sad to see it go.

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Happy New Year to everyone! As I mentioned, 2019 turned out to be a fabulous year. I’m going to review some details on what happened during 2019. If you fell asleep on January 1st and woke up on December 31st, and you look at where the major indices are, you’d say, “Wow, that was an incredible year!” However, it wasn’t without some turmoil throughout the year. So, let’s look at the 2019 stock market financial year in review.

The 2019 Stock Market Financial Year in Review

2019 Financial Year in Review - Market Last 6 Months 2019

Figure 1 Chaikin Analytics | 2019 Financial Year in Review

I want to go back in Figure 1, and show you the last six months of the markets. You can see the markets we over the previous six months were anywhere from, about a positive 5% to a positive 10%, depending on the index.

2019 Financial Year in Review - Market Last 3 Months 2019

Figure 2 Chaikin Analytics | 2019 Financial Year in Review

If we narrow in it down to a three-month time frame in Figure 2, we see gains anywhere from almost 12.5% to a low about 7%, which means there was still a bit of pain recovering from the second quarter.

Remember, the third quarter was the only quarter for the entire year, where we end up with negative returns overall. So, the best quarters for the full year were the first quarter and the fourth quarter. Now, how did all this happen? We looked at what was going on early in the year, where we wound up with an inversion on the yield curve that was signaling recession. The yield curve lost the inversion, and we now have the 10-Year Treasury yielding higher than everything down to the One-Month Treasury. The question now is: Is that the end of it? Does that mean that a recession is not on the horizon?

What About the Economy?

If we look at the economy as a whole, I could say the economy today looks as strong as it did back into the 1950s. It looks as healthy as I’ve seen it in the last 30 years of my time in this industry. However, that doesn’t mean everything will continue to do exceptionally well. I do think as we roll into 2020, corporate profits are going to continue to go up, and consumer spending will continue to rise. I believe we’ll see GDP touching the 3% mark in 2020.

Housing starts, just this last month, recorded their best start in 12 1/2 years, and that’s pre-Great Recession. So, a lot of great things going on, and we still have that 10-Year Treasury down below 1.9%. So, money is still incredibly cheap.

The Federal Reserve in 2020

Jerome Powell is virtually sitting on the sidelines, saying, “Hey, I don’t see any need to do anything.” And if you’ll recall in the fourth quarter of 2018, it was Jerome Powell’s comments where he thought he was going to have to raise rates four times in 2019, because he thought the economy was heating up.

Well, what happened was precisely the opposite. Powell wound up lowering rates three times as opposed to raising rates four times. As a result, it helped give the market a significant boost in 2019. So, with Jerome Powell sitting on the sidelines now and very little threat of inflation on the horizon, corporate profits look great, housing starts look great, and consumer confidence is high. All of which could bode well for a good 2020. Plus, it’s an election year, and the incumbent is running for re-election. So, that could bode well for the markets looking higher.

The Stock Market in 2020

2019 Financial Year in Review - Power Bar

Figure 3 Chaikin Analytics | 2019 Financial Year in Review

I want to show you something in Figure 3, as we look at the, what we call this “power bar” in the center separated into green, yellow, and red segments. If we look at the NASDAQ 100, you can see 24 green stocks, that’s bullish, 64 are neutral, and only 11 are bearish. You can run down to the Russell 2000, S&P 100, etc., and you’re going to see more bullish than bearish stocks in just about every single one of these different indexes. That’s a good sign rolling into 2020.

I want to remind you, though, something could take place here in January. A lot of people saw their portfolios get out of whack as far as the asset allocation goes. Maybe there’s more equity exposure now in the portfolio than what there should be; there could be a lot of rebalancing going on in January. That rebalancing could spark a little bit of selling. So, I expect to see a little bit more volatility here in January than what we saw over the last quarter.

What Can We Expect in 2020?

I don’t see anything on the horizon that is going to be something that I would say, “Gosh, we got to make some major changes.” What I would suggest, though, is that everybody takes a step back and speak with your advisor here at Barber Financial Group. Let’s work together to understand what your allocation is today, how it has changed over the last six or seven months, and make sure that we don’t need to do some rebalancing. We’re taking care of that on our end, but it’s smart for you to make sure that you’re fully engaged with your advisors here at Barber Financial Group.

The SECURE Act, What is it?

Now, one thing happened in December, and it was Congress pushing through something called the SECURE Act. We’re going to be talking about that on America’s Wealth Management Show. We’ll also be putting some seminars together on the subject.

Say Goodbye to the Stretch IRA

What the SECURE Act did was killed the Stretch IRA. So, all of you with significant money in your IRA accounts, when you pass that money to the next generation, your children, and your grandchildren, will no longer be able to stretch that out over their lifetime. It’s going to be forced out over a ten year period that could cause some enormous erosion from excess taxation. Consequently, we’re working on strategies to try to help you manage that issue. Anytime we have a significant legislation change like this affecting such a large portion of somebody’s retirement; it requires some in-depth discussions with every one of you on the money you have in your retirement accounts and how you want to pass that down.

2019 Financial Year in Review Wrap-Up

2019, we’re sad to see it go. From a financial perspective it was a great year to review. In 2020 I expect a little bit of a rocky start, but hopeful things can hold together in the economy. It’s going to be an election year with a lot of fireworks. Let’s hope January isn’t as bumpy as I anticipate. I’ll catch up with you here in the first part of February, and let you know what my thoughts are. Until then, please make sure you’re keeping us informed of anything going on in your life. Keep us apprised to any changes happening, and make sure we’re getting things updated in your overall retirement plan.

In conclusion, I have a couple more items that I want to note. Please make sure that you subscribe to our YouTube channel. Every time I do a video like the 2019 Financial Year in Review, you’ll get an update, and it’ll show there’s a new video out there from Barber Financial Group. So, subscribe to our YouTube channel. Also, be on the lookout for The Guided Retirement Show – Season Two premieres on January 7th. Find it on your favorite podcast app or also on YouTube. You’re not going to want to miss any of these episodes that we got coming up in season two. There are some fascinating conversations that I’m having with some unbelievable guests. I can’t wait to see all of you. And again, happy new year, and let’s look for a prosperous 2020!

Dean Barber
Founder & CEO

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Investment advisory services offered through Barber Financial Group, Inc., an SEC Registered Investment Adviser.

The views expressed represent the opinion of Barber Financial Group an SEC Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Barber Financial Group does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.