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Revisiting 2019 Market Predictions

Written by: Corey Janoff

After a couple of weeks off from the blog, we're back and ready to tackle the new decade headfirst!  For those of you who have been reading this blog for at least a year, you may remember a blog post I wrote in early 2019 titled: 2019 Market Predictions.  It was a rather facetious blog post to encourage readers to stop watching the news and not to put too much faith in stock market prognosticators.  Nobody knows for certain what the future holds, no matter how smart or qualified they may be.  

I thought it would be fun to go back and revisit my “predictions” for 2019 and see how they fared.  I’ll summarize what I wrote in January 2019 and compare to what actually happened.

US Stocks

What I said: 

I predict major US stock indices will either rise in value, fall in value, or end the year roughly where they started. I predict that at some point during the year, stocks will rise.  After they rise for a period of time, there will be a subsequent period of time during which stocks will fall. I also predict that stocks will fall at some point during the year.  After they fall for a period of time, there will be a subsequent period of time during which stocks will rise. 

What Actually Happened:

US Stocks started the year off hot with the S&P 500 index rising from 2,510 on Jan 2, 2019 to almost 2,946 on April 30.  Nothing like a 17% return in 4 months to make you feel optimistic.  

From May 3rd to June 3rd, the S&P 500 fell by 201 points, or a 7% drop in a month. If that trend continued for a year, that would be an 84% annualized loss!  Good thing recent performance isn’t a good indicator of the future.    

From June 3, 2019 to July 26, 2019, the S&P rose back up to just under 3,026, or a 10% increase.   Then a quick 6% drop during the next week from July 27 to August 5, followed by a couple weeks of choppiness.   Then a sprint to the finish line the last few months of the year to finish at an all-time high, up over 30% since the beginning of the year.  

International Stocks

What I Said:

I predict the same thing will happen with international stock indices as with US stocks. I also predict that international stocks are unlikely to move in lockstep with US stocks. 

What Actually Happened:

International stocks followed a similar trajectory as US stocks.  The gains were not quite as pronounced though, with developed markets finishing up about 20% and emerging markets up about 15%.  

Bonds

What I Said:

I predict that bond prices will either rise, fall, or remain mostly unchanged. I predict that the majority of the return from bonds will come from the yield (interest payments) and not price appreciation/depreciation. 

What actually happened:  

I was half right here.  Thanks to falling interest rates, bond prices rose quite a bit compared to normal (whatever normal is).  The aggregate bond index was up almost 9%, while corporate bonds were up almost 14%.   Those are good results for stock investors in many years!  

In this case, my prediction was wrong, because the majority of the returns were from price appreciation, rather than interest payments, as the yields on most bonds were between 2-3% on average.  If you ask me to predict the future, there’s no guarantee I will be correct! 

Long-term though, the majority of a bond’s return will likely come from its coupon payments, especially if it’s held to maturity.  

market predictions

Real Estate

What I Said:

I predict that real estate prices in the US will either rise, fall, or remain mostly unchanged. I predict that in some cities real estate prices will rise and in other cities real estate prices will fall. 

What Actually Happened:

I was spot on.   Most cities saw increases in real estate prices.  This is likely thanks to strong employment and falling interest rates, which lowers borrowing costs, enabling people to afford a larger mortgage.  In some cities prices were flat, and a few were down slightly.   

Currencies

What I Said:

I predict that the US dollar will rise in value compared to some foreign currencies and fall in value compared to other currencies.  With some currencies, the exchange rate will remain mostly unchanged. 

What Actually Happened:

As a whole, the dollar is slightly stronger (at the time of this writing in late December 2019) than it was a year ago, although it has weakened a little since the early fall.  

Compared to the Canadian dollar, Canada’s dollars buy about 4% more American dollars than it did in January 2019.  

Compared to the Euro, we can buy about 3% more Euro’s than we could at the beginning of 2019.  

We can buy about 2% more pounds in Great Britain.  

So, there you go.  Our dollar is stronger in some countries, weaker in others, and mostly unchanged in some. 

Closing Thoughts

Consistently predicting with accuracy what will happen in the future is near impossible.   That does not mean that you get a pass on doing proper due diligence and portfolio maintenance.  

For example, if you burrow down deeper into the numbers, you will notice that US growth stocks outperformed US value stocks in 2019 and the majority of the last decade.   If you haven’t been mindful of this and rebalanced your portfolio regularly, there is a good chance your portfolio has a heavier allocation to growth stocks than value stocks at this point in time.  

What does that mean moving forward?  Well, if growth stocks continue to outperform value stocks, that would be beneficial to you.   But if value stocks outperform growth stocks, you will have a large portion of your portfolio in growth stocks that are underperforming and a small portion of your portfolio in value stocks that are doing well.  Historically, growth and value stocks tend to deliver similar results over time, but often move inversely of each other.  Years when value stocks do well, growth stocks usually don’t do as well.  And vice versa.  

portfolio rebalancing

Rebalancing your portfolio regularly to maintain an even balance between growth and value stocks will help you accomplish several things:

  • Sell high and buy low.  Capture gains when they present themselves and reinvest in lower prices elsewhere.  
  • Ensure that a healthy portion of your stock allocation will be invested in whichever area outperforms the average in a given year.
  • Ensures not too much of your stock allocation is invested in the area that underperforms in a given time period.  

There are no guarantees that maintaining an equal balance between growth and value stocks will deliver better long-term results, but it is one strategy that many investors adhere to.   

This regular maintenance extends to all aspects of your portfolio and financial strategy.  You don’t need to watch your accounts like a hawk and make weekly tweaks.  Studies have shown that is counterproductive to long-term results.  The annual or semi-annual spot-check is likely all you need to do.   

Are you on track to achieving your financial goals?  What adjustments can you make to your savings and spending habits to increase the odds of achieving your goals in the timeframe you want to achieve them?  Do you have the opportunity to earn more income to accelerate your goals?  Or the ability to scale back and earn less income to enjoy life more?  Are your portfolios still in line with your original strategy?  Have your goals changed?  Has the time horizon on when you need some of your investment dollars changed?  Do you need to adjust your investment strategy to account for that?  

While there are plenty of other more enjoyable and possibly less stressful activities you could partake in, treat your financial reviews like your oil changes and dentist appointments.   It’s preventative maintenance.   

Put some thought into all of it.   Why are you working to earn money?   Money is a tool to enable you to do the things you want to do.  Why are those things important to you?  If they’re not important, then why are you doing them?  

There is no perfect strategy.  Everybody has a unique set of circumstances and goals and dreams.  The steps you need to take to achieve your financial goals may be different from your friends or peers.  And that is absolutely fine.  You don’t need to compare yourself to your friends or some arbitrary stock market index to gauge your success.  The only benchmark you need is you and your goals and whether you are living the life you want to live.  

With that, have a happy and healthy 2020!

Disclosures:

Any examples are hypothetical and for illustrative purposes only.  This should not be considered a recommendation for any particular investment strategy.  Consult with your financial advisor before implementing an investment strategy.  Any investment involves the possibility of loss, including total loss of principal.  Indicies mentioned are unmanaged and cannot be invested in directly.

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