quarterly market review third quarter 2019 · 2020-04-01 · Source: First Trust Advisors L.P. This...
Transcript of quarterly market review third quarter 2019 · 2020-04-01 · Source: First Trust Advisors L.P. This...
quarterly market review
third quarter 2019
3
O C T O B E R 1 1 , 2 0 1 9
Dear Investors,
As you may remember, the first half of the year delivered remarkably strong returns with all major equity indices
posting double digit gains, despite negative headlines and geopolitical turmoil. Unfortunately the third quarter
brought continued negative headlines and geopolitical turmoil, although the markets finished the three-month
period essentially flat. Over the last several months there has been a noticeable increase in the migration away
from growth/risk assets into more conservative, lower volatility investments. This is evidenced by comparing
indices like the Russell 2000 (smaller cap, growth oriented stocks) which was down 2.4% in the third quarter, while
bonds (measured by the Barclay’s U.S. Aggregate Bond index) were up 2.27%. Another interesting indicator was the
difference between sectors within the S&P 500 Index. An example of this is the fact the total S&P index was up only
1.7% for the quarter while the typically less volatile S&P utility specific sector was up 8.4% for the quarter (according
to Nasdaq.com). The drag on the index was by the very names that have been leading this bull market; for example
FAANG + Microsoft posted a negative 1.84% return for the quarter. This lagging performance of the higher growth
areas of the market is something we have been focused on and will continue to monitor as we rebalance portfolios
going into the end of the year.
Putting this performance into perspective, we have recovered the losses from 4Q 2018, although we are essentially at
the same index levels as the beginning of 2018 and below where we were August of 2018. Considering the escalated
conflicts, continued Brexit complications, protests in Hong Kong, hostilities involving North Korea, Iran, and
Syria, impeachment hearings, and the growing rhetoric on the Democratic campaign trail approaching an anti-
capitalistic tone, perhaps a flat market for the quarter should be considered a win. On the other side of the coin, the
U.S. economy seems to be maintaining GDP growth of around 2%, unemployment came in at 3.5% for the month of
September (the lowest since 1969), wage growth over the last year has been approximately double for those without
college degrees compared to those with higher education, and interest rates remain at progrowth levels (during the
third quarter the Federal Reserve cut the fed funds rate twice in 0.25% increments). Despite these cuts, the 2yr/10yr
yield curve remains inverted, indicating a higher potential for recession.
Clearly the table has been set for continued volatility and emotionally driven markets, which only highlights
the importance of remaining focused on a longer term plan. We have been systematically reducing exposure
throughout our investments, and plan to continue to do so. That said, a time may come when volatility may present
opportunity, and we want to make sure we’re in a position to be able to take advantage of a subsequent sell-off. As we
mentioned in last quarter’s letter, we will not react to headlines and short-term swings in the market. Rather, we will
continue to be attentive to how our portfolio companies are progressing on a fundamental basis and whether our
managed funds are performing as expected for the benefit of our clients’ portfolios, in good markets and bad. As we
monitor your portfolios, we will continue to focus on risk-adjusted returns as preserving capital during market
declines is critical to achieving attractive compounded growth over time.
We would like to share this graphic from the ETF provider First Trust, as a reminder of how the market as a whole
has performed historically over time, despite significant headline risk (noting that past performance is not a
guarantee of future results). This is a terrific illustration of why it is so important to stick to a long-term plan
even when it feels like more headwinds than tailwinds.
$0
$5,000
$10,000
$15,000
$20,000
$25,000
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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
S&P 500 IndexJanuary 1, 2008 – September 30, 2019
1-800-621-1675 | www.ftportfolios.comFirst Trust Portfolios L.P. | Member SIPC | Member FINRA
This chart shows the growth of $10,000 based on S&P 500 Index performance over the last several years. Although past performance is no guarantee of future results, we believe looking at the market’s overall resiliency through several major crises and events helps to gain a fresh perspective on the benefits of investing for the long-term.
T H E A V E R A G E A N N U A L T O TA L R E T U R N O F T H E S & P 5 0 0 I N D E X F O R T H E P E R I O D S H O W N B E L O W W A S 8 . 4 9 % .
Source: First Trust Advisors L.P. This chart is for illustrative purposes only and not indicative of any actual investment. The S&P 500 Index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance. Investors cannot invest directly in an index. Index returns do not reflect any fees, expenses, or sales charges. Stocks are not guaranteed and have been more volatile than the other asset classes. These returns were the result of certain market factors and events which may not be repeated in the future. Past performance is no guarantee of future results.
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial advisors are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
$26,054
Haiti earthquake
Obama signs Dodd-Frank
law
Federal Reserve arranges takeover of
Bear Stearns byJP Morgan Chase
Congress passes TARP (Troubled AssetRelief Program)
Lehman Brothersfiles for bankruptcy
protection
$787 billion U.S.stimulus bill signed
Japan earthquake
Brexit Vote
Deep Horizon Oil Spill
Greek debt cut to below investment grade
European sovereign debt crisis continues to
spread
End of QE 2
Obama signs healthcare bill
Obama sworn in as presidentof the U.S
S&P downgrades U.S. debt rating to AA+
ISIS begins offensive in Iraq
QE 3 tapering begins
Hurricane Sandy hits New Jersey
Boston Marathon Bombings
California has worst drought in history
OPEC announces production cut
Detroit, Michigan filesfor bankruptcy
Russia movestroops into Crimea
U.S. Real GDPgrowth in Q1 falls ata 2.1% annual rate
Ebola outbreak in West Africa
Swissde-peg
from Euro
Argentina defaults
on its debts
Oil price collapse begins
Eurozone financeministers approve
second bailout of Greece
EU and IMF bailout Ireland
Flash Crash
Meredith Whitney predicts muni bond
troubles
Euro zone to impose tighter fiscal control
over members
U.S. Supreme Courtaffirms “Obamacare”
Chinese stock market crashes
Russia launchesair strikes in Syria
U.S. hurricanes Harvey & Irma
U.S. fed funds rate hiked to 0.50%
U.S. fed funds rate hiked to 0.75%
With edge of Fiscal Cliff in sight,
still no deal
Portugal receives bailout
U.S. Debt Crisis Imminent
Dubai creditcrisis shakes
global market
End of QE 1
End of QE 3Paris Terror Attacks
N. Korea confirms successful testing of nuclear
device
Partial U.S. federal government shutdown
H1N1 virus “global pandemic”
U.S. budgetsequestration
takes effect
Bull market in stocks turns 8
years old
U.S. Real GDPgrowth in Q1 falls ata 0.2% annual rate
Donald J. Trumpelected 45th President
of the U.S.
U.S. announces tariffs on
imported steel& aluminum
Real U.S. GDPgrowth rises to 4.2%
(ann) in Q2’18
$10,000
U.S.-China announce 90-day tariff truce
Trump hikes Chinese tariffs from 10% to 25%
Fed indicates it won’t hike rates in 2019
U.S. fed funds rate hiked to 1.25%
Fed announcesplan to reduce sizeof its balance sheet
Fed cuts fed funds rateby 25 bps
Oil closed above $70,first time
since 2014
As mentioned in our last quarterly letter, we are continuing to roll out new initiatives aimed at enhancing the way
in which we communicate and interact with you throughout the investment process, all of which are designed
to enrich your experience, increase transparency, and enable us to deliver quality investment services. To that
point, you should have recently received a short questionnaire designed to help us establish and document an
appropriate individual risk profile for you. If you haven’t already done so, please complete the questionnaire and
return it. If you have any questions or concerns please give us a call. One additional housekeeping reminder: to the
extent you would like Sargent Investment Group to process charitable gifts, we request that you avoid waiting until
the end of December as last minute transfer requests during that busy time may result in processing delays by our
custodian. In a worst case scenario this could lead to missing a 2019 deadline that may be part of your tax planning.
As always, we thank you for your faith and confidence in us, and we look forward to the opportunity to continue to
earn both. As always, we thank you for your faith and confidence in us, and we look forward to the opportunity to
continue to earn both.
Regards,
Christopher Sargent
Principal
Ricardo Rosenberg
Principal
Brian McGregor
Principal
Important Considerations:
The views and opinions expressed are for informational purposes only as of the date of writing and may change at any time based on market or other conditions and may
not come to pass. This material is not intended to be relied upon as investment advice or recommendations to buy or sell securities. The information provided is taken from
sources we believe to be reliable but it has not been independently verified. All investments carry a certain degree of risk and there is no assurance that an investment will
provide positive performance over any period of time. Past performance is not a guarantee of future results.