By David Kopyc
I’ve been fortunate to have been in the financial services business for over 35 years. I saw the Dow break 2000 for the first time and every major event since. Flash crash, internet melt down, financial crisis etc.
I’ve always resorted back to the individuals that I feel are the backbone and the individual financial pillars of our industry: Peter Lynch (Fidelity), Jack Bogle (Vanguard), Charles Schwab (Schwab Investments), and Warren Buffet (Berkshire Hathaway).
If you remember about one year ago, the markets were in high anxiety and most of the wall street experts were predicting doom and gloom. We were heading for a recession and the stock market was positioned for a major pullback. We are having an exceptional year in the markets and the same experts that were wrong about this year are pretty optimistic for 2020. As I’ve said many times to clients and to radio listeners, it’s “time in the market, not market timing.”
No one likes volatility and the stress that is associated with market corrections. Most individuals seem to think that financial advisors have a crystal ball of the future corrections to come in the financial markets. I can tell you that is not a consistent formula for success and occasionally an advisor makes a correct call and has success for a brief period of time.
Warren Buffet won $1 million bet from a hedge fund manager by simply placing his bet on an index fund, not an actively-managed portfolio. Remember, “time in the market, not market timing.” It has been proven time and time again that trying to pick the bottom and sell at the top is impossible. Buy and hold. Then, when you get a correction, it’s like the blue light special at Walmart—stocks are on sale. The Nasdaq is up over 500 percent from the financial crisis. How many individuals stayed the course, made those returns, and bought when everyone else was leaving?
Louis Rukeyser previously hosted a program on PBS called “Wall Street Week.” At the end of the year, they would make predictions for the future year ahead and take a review of what their expectations had been for the year that was coming to an end. Because I love to seek a challenge, I’m going to do my own version of this for a test of my own personal ability to predict the future outcome of the markets for 2020.
2019 was a year that most analysts expected low to moderate returns to stock portfolios. If you go back and read their predictions, it was considered bullish to have success with a high single digit return on equities. Most bond analysts were not even close to their predictions for the net total return for a fixed income fund. Remember, it’s “time in the market, not market timing.” All the individuals that went to cash in December of 2018 lost out on great returns. We are currently sitting on $7 trillion in cash equivalents, and money market funds.
2020, I believe, will be a year of great caution for both equity and fixed income investors. Since 1952, the Dow Jones Industrial Average has averaged 10.1 percent when a sitting president runs for reelection. Wall Street does not like uncertainty, and they know what they have with the current president for economic policies. But because these are unprecedented times, you throw in all the noise of impeachment, the disfunction of Washington, the extremely low interest rates we still have, and the multitude of other issues we are facing, you have to come up with a personal gut check.
This prediction is taking into consideration that we do not have a Black Swan event in 2020. I personally believe that most individuals vote with their checkbook and how well they feel about their own personal security. We have a very robust economy with historically low unemployment and the help wanted signs are out wherever you go. I know that I spend a considerable amount of time digesting news and information, but my family who mostly are hard-working earners, find little or no interest in the recent clashes with Washington lawmakers and the media.
It’s my belief that we will continue this Bull Run and the mother’s milk of equities is increasing earnings that will deliver again in 2020. Strong earnings typically give us higher equity prices. A famous quote from Peter Lynch “the key to making money in stocks is not to be scared out of them”.
Find the correct asset allocation of stocks, bonds, and cash and stay fully invested and let “time in the market, not market timing” be your trusted friend.
By David Kopyc