Looking for Good News

Often times in the news, positive headlines sink to the bottom and the negative headlines float to the top. Such is the case regarding the economy and the stock market currently.

With that in mind, I thought I’d send out a positive prediction for 2019 that caught my eye from a well-known bank, JP Morgan Chase. They sent out a letter to their clients recently predicting a 17% gain in the stock market next year!

You can read the article and the details yourself here, but they’re essentially saying the S&P 500 will end next year at 3,100. After today the index is now at 2,545. They state that investors will be lured back into the stock market because: 1) the economy will continue to grow into next year, 2) the trade war with China will likely be resolved, and 3) companies are paying dividends and buying back their own shares next year to the tune of $1.5 Trillion.

What’s even more encouraging is that 14 other strategists surveyed feel similar to JP Morgan Chase and believe the S&P 500 will end close to the same high levels.

While there certainly are predictions stating the opposite, it doesn’t benefit us as investors to focus on them. In fact, selling out and sitting in cash even for a few “UP” days can be incredibly detrimental to a portfolio. Listen to these statistics over the last 10 years:

1) 8 of the 10 biggest up days happened within 1 month of the biggest down days.

2) If an investor in the stock market missed the biggest 5 days they would have lost 32% of their total return over the last 10 years.

The bottom line is while the market continues to be dramatic and price in the worst case scenario, it really does pay to sit tight.

At our KaiPerm Credit Union presentation last week, a gal asked if we were going through another 2008-9 situation. I kindly had to remind her that this is nothing like 2008.

To put it into perspective, the wheels were coming off the financial system back then and the fear was a total collapse of the banking system. Today we suffer from concern stemming from a little bit of slower growth. Serious enough for a pullback, not serious enough to ruin your holidays.

Thank you for reading! We’ll be in the office over the next few weeks, so please feel free to reach out if we can do anything for you.

Happy Holidays from all of us at SMB,

– Bruce Porter & Tim Porter, CFP®