This last month has reminded us of why we don’t try to predict which direction the stock market will go. October is typically the worst month of the year and we were anticipating this October would be no different. With seasonal fears, trade disputes ratcheting up, and increasing recession predictions… we hit new highs and they’re continuing to push higher as I write this!
The reason? Things are Not As Bad As Feared. We have a trade war with China that’s not escalating into something worse, an economy that does not appear to be headed for an imminent recession, low unemployment, earnings from companies that are in line with expectations, and a Federal Reserve that lowered rates again.
This has provided a much-welcomed relief rally in the market that may continue until the end of the year. This should be reflected in your October statements.
Aside from some minor tweaks that we’ll discuss in the next section, we’ll likely keep some cash in each portfolio as we await the next news cycle. Issues like the impeachment inquiry and further escalations in the trade war could give us another opportunity to put the cash to work.
Moderate Funds Portfolio
In the moderate funds portfolio, we’re rotating out of some of the existing funds and into some new funds with lower expenses. After evaluating the current funds we use, we found that Vanguard, iShares, and SPDR funds have lower internal expenses. Keeping these internal expenses low will help to increase return over time.
Growth Stock Portfolio
In the growth stock portfolio, we’ve added to a few positions hoping to get a pop on earnings. We bought more in Grand Canyon Education LOPE which reported better than expected earnings, but disappointing news about two partnerships that came to an end. The stock is down on the news, however, we still like them long-term and are hopeful they will raise 2020 guidance next quarter which should help the stock.
We also bought more of a company we’ve liked for a long time, a company we’ve described as the South American Amazon, Mercadolibre MELI. They reported a larger than expected loss this quarter as they invest heavily in marketing the Mercadolibre (similar to Amazon) and Mercadopago (similar to Paypal) names. The stock dropped and we took advantage of the opportunity. They have continued to accelerate their revenue growth now at 70% year over year. No telling what could happen in the short term but we think over 3-5 years this could be our best performer in the portfolio.
All in all, this has been a good year for all investors and we’re hopeful it’ll hold up through the holiday season.
Estate Planning and Taxes
In other news, we’ve recruited an estate planning attorney that does will and trusts, Pam Nicholson, AND a trusted CPA we’ve been using, Virginia Platten, CPA, to move into our building. If anyone is looking for either of those services, please let us know. They’ve both taken great care of the clients we’ve sent them and they are conveniently located in our building now.
If you want to discuss any of this further or have other questions about your financial situation, please don’t hesitate to contact us.
– Bruce Porter & Tim Porter, CFP®