Market Update – July 2019

July 18, 2019

Drew Gearhart [00:00:01]

Welcome everybody. I’m Drew Gearhart. One of the client consultants here with Warren Averett Asset Management. Today we have John Cox our Chief Investment Officer with Warren Averett Asset Management to deliver the second quarter investment commentary. So John the first quarter was really strong for the stock and bond markets. How was the second quarter? So far.

John Cox [00:00:23]

You’re right the first quarter was really strong. Most of the equity asset classes were up in double digits for the first three months. So we did not expect a similar result for the second quarter. But we were pleasantly surprised that all major asset classes again delivered positive results. With U.S. Large company stocks and international developed markets being up about 4 percent bonds up about 3 percent and U.S. small caps in emerging markets 1 to 2 percent. So at this point in the year the midway point. 2019 is the best year since 1997.

Drew Gearhart [00:01:04]

Some people in the financial media have talked about the Sell in May and go away. Tell us you know how do you adhere to that advice is that good for people to do or what would you like for our clients and others to understand about that?

John Cox [00:01:19]

I think there are a lot of times where investors try to outsmart the markets and so they look at patterns which may exist in certain periods and not in other periods and the Sell in May and go away is one that’s been around for a while because you can look at statistics and see that certain parts of the year. Have historically delivered better returns for example May to October tend to not have the performance that November to April. Have. But it goes in cycles and so sometimes that works and sometimes it doesn’t. We would advise against that. And if you look at just the last 15 years as an example 13 of those times the May to October period has delivered positive results. So you would have you would not benefited from being out of the markets. So our advice is be long term investors and don’t try to go in and out of the markets.

Drew Gearhart [00:02:18]

This is a big question we get all the time. How frequently should we be looking at our investment accounts and how often should we be watching and paying attention to news networks like CNBC and paying attention to Internet sites and reading articles?

John Cox [00:02:38]

It’s human nature to want to view your accounts pretty frequently especially in times of turmoil or in good times. And so we don’t discourage clients or investors from doing what they feel comfortable with. However if you view your accounts too frequently it could create undue stress and anxiety and cause you to feel like you need to be making changes more more often than you really do. So our advice is to potentially look at monthly statements and quarterly statements but not look at intra day activity or even during the week especially when you know markets are disappointing and again can cause some anxiety. Investing is a long term strategy and you need to exhibit patience. And so last quarter we talked about how investment markets are similar to seasons of the year and you have to go through winter to get to get to springtime. Well my analogy this quarter is using the U.S. World Cup women’s team in the championship game against the Netherlands. They didn’t score a goal until the sixty first minute of the game so they didn’t experience early success but they were patient and didn’t give up and kept their their objective in mind and obviously they won and were successful in investing as much that same way.

Drew Gearhart [00:04:14]

John it seems like there’s been a lot of news lately surrounding the U.S. China trade negotiations and also interest rates and what the Federal Reserve is going to do. Can you give us an update on what how that’s going to affect all of our clients and then any other kind of major things out there looming?

John Cox [00:04:34]

Right well if it seems like we’ve been talking about this for 18 months it’s because we have it’s been a year and a half since we’ve talked about the Federal Reserve and what’s going on with the U.S. China trade talks. If we focus first on the Federal Reserve over the last year year and a half they’ve been raising interest rates and now they’ve shifted gears and taken a pause for for the time being and investors and economists now expect the Fed to start lowering interest rates. And you know the main goal of the Fed is to maintain price stability or to avoid high inflation and to have full employment. And right now they’re achieving both of those goals. So even though you know there’s a lot of debate over what the Federal Reserve should be doing we feel like right now they’re actually executing their strategy pretty pretty well. Switching gears to the U.S. China negotiations it just seems like it’s been a roller coaster ride for the last several quarters because they they appear to be getting close to a deal and then there’s a disagreement and they walk walk away from the table and the market sell off and then they come back and start having productive discussions. The most recent news that we’ve heard from the Treasury secretary is that they are 90 percent of the way there to actually getting a. Deal on tariffs trade imbalances and resolving some intellectual property theft issues. So we feel pretty good. And it would be unusual for this to drag on beyond 2019. So I don’t expect us to still be talking about this quarter after quarter. But for now they’re still in negotiations and we don’t have a final deal. Hopefully by the next quarter when we talk about it we’ll have some positive news.

Drew Gearhart [00:06:34]

Thank you John. Thank you for everybody. Please join us for our third quarter commentary and please contact your adviser within Warren Averett Asset Managerment If you have any additional questions.

 

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