Video Newsletters: Insights and Observations

Everything listed under: Market Observer

  • February 2020

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    Kevin: Hello, John Finley and Kevin Coyle here, it’s February 10, 2020; John, a quick update on the year behind us?

    John: 2019, good year in US stocks, up 31% on the S&P 500. Most of that, of course, being driven by large cap growth companies. That of course is coming off a pretty bad 4th quarter in 2018 where stocks were down almost 20%. If you take that into consideration, it’s still a good year but valuations are getting up there and I’m not sure if corporate profits are able to sustain that kind of level for some of these stocks.

    Kevin: If you look at most of the prognosticators this time of year when all their forecasts come out and they look at where interest rates are, where earnings are, where price multiples are, and they give you their expectations of the 10-year forecast. Those are looking to be lower than what you would expect compared to the last 10 years.

    John: Yes, that is largely because of evaluations and the feds are on hold so interest rates will stay low for awhile but you’re right. When you’re starting at those kinds of large multiples, the expected returns are going to be lower.

    Kevin: We’ll chat a little bit about that at the end, but let’s go into some of the ranges of expectations in terms of economic activity the year ahead and things like that.

    John: Our view is pretty much in line with the consensus, and we're looking at around 2% or so real GDP growth in the US. Feds on hold as I said, inflation is still tame, there is, of course, always downside chance that the economy may take a turn, but we think the recession probabilities are low. Likewise, I think there's an even smaller chance the economy could grow at a much faster clip. I don't see that happening, but you never know.

    Kevin: When you look at the expectations and they're lower than if you look over the long-term history of expected returns from stocks, and that's been from the big run we've had over the last 10 years. It's not just going to be a single digit straight line. You would expect some volatility over the next 10 years, which is normal when you have peaks, troughs, economic growth, etc. So, when you're making your marginal decision making, in terms of your overall portfolio structure, just some final thoughts.

    John: Stocks are the place to be for the growth component of everyone's portfolio, and you're right, there's going to be volatility on a short-term basis. But on a long-term basis, you want to keep that allocation steady. There may be some opportunity here with growth stocks being valued the way they are, we may see that long awaited rotation out of growth in the value because there's many companies that are not trading at high multiples. So that could be an opportunity for some people to shift out of the growth component into the value side.

    Kevin: With that being said, we have maybe a month or so left with this winter, we're looking forward to spring. Until next time. Enjoy.

    All information is from sources deemed reliable, but no warranty is made to its accuracy or completeness. This material is being provided for informational or educational purposes only, and does not take into account the investment objectives or financial situation of any client or prospective client. The information is not intended as investment advice, and is not a recommendation to buy, sell, or invest in any particular investment or market segment. Those seeking information regarding their particular investment needs should contact a financial professional. Coyle, our employees, or our clients, may or may not be invested in any individual securities or market segments discussed in this material. The opinions expressed were current as of the date of posting, but are subject to change without notice due to market, political, or economic conditions.

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  • November 2019

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    Kevin: Hello, Kevin Coyle and John Finley, November 7th 2019. Quick update on where we are at year-to-date on the markets.

    John: Today the US market hit a new high, so it is up about 25% on the year. International developed stocks are up 17% and the emerging markets are up 13%.

    Kevin: Now we’ve had a nice little bump since the end of the 3rd quarter but put that in the context of where we started the year after the decline in 2018. And going back maybe even early in the year of 2018.

    John: Everyone remembers how ugly the 4th quarter last year was when stocks were down about 19% in the US. So we needed to recover from that but even if you go back to February 2018 compared to today, stocks are up only about 10%.

    Kevin: Yes, so we have been in a range just shy of the last 2 years, had a nice little bump out where news seems to be better over the last 2 months. The challenge is to help folks to structure their affairs in these types of environments. It seems like in the last 10 years these markets have been climbing this wall of worry, people have been concerned about it even more so now. Stocks have gone up so much John, they have to go down.

    John: Well, that’s one theory, that we’re in a bubble. We need to step back and ask ourselves; what actually drives stock prices higher?  The driver of stock prices are the earnings of those companies. We have had stocks triple since the end of the financial crisis but at the same time earnings have tripled as well. So the fundamentals have supported stock prices where they are today.