Third Quarter, 2019 – Comments and Opinions
“If by the liberty of the press were understood merely the liberty of discussing the propriety of public measures and political opinions, let us have as much of it as you please: But if it means the liberty of affronting, calumniating and defaming one another, I, for my part, own myself willing to part with my share of it.” — Benjamin Franklin (1789) – writer, printer, scientist, inventor, political philosopher, postmaster, humorist, civic activist, statesman, and diplomat.
Dr. Franklin, one of our greatest founding fathers, stated that Argumentum ad Hominem (a type of argument that sidesteps the topic of discussion and instead attacks the character of the opponent in the debate) was not fit for civil discourse. Sadly, this rhetorical device is used all too often these days. As the war of the words rages on during this political season in our news media, our economy and securities markets have actually performed surprisingly well.
Our Stock Market – The Dow Jones Industrial Index passed a new milestone, crossing over 27000 for the first time ever, closing up 227 points, at 27088 on July 11, 2019. The S&P 500 approached its own new milestone, closing at 2999 on the same day. Looking back to an earlier high, the S&P 500 broke 300 on March 23, 1987. The S&P 500 index rose 1.19% in the Third Quarter of 2019.
The Economy – The biggest economic news in Q3 was the growing trade dispute between the U.S. and China. U.S. complaints include China’s ongoing theft of our trade secrets, manipulation of their currency, the yuan, and barriers to our entering their markets. Trade secrets are protected by our patent laws. The Chinese ignore these laws by either reverse engineering our products or by hacking into our corporations, blatantly ignoring our patent protection laws. The Chinese currency, the yuan, can be manipulated by them at any time. China, being a totalitarian government, ignores the market valuations of their currency to suit their needs. A lower yuan makes their imports to us cheaper and our exports more expensive to Chinese buyers. For decades China has taken advantage of other nations by employing trading dishonesty. In early October President Trump and Vice Premier Liu He met at the White House to discuss an incremental trade agreement. They began with one step and will continue to meet over time in an effort to conclude an overall trade agreement that would be agreeable to both sides.
Looking Ahead – Our American stock and bond markets have performed well on average over the past ten years. From the lows of 2009 to the present highs of 2019, the domestic stock markets have rewarded many who held on throughout the decade. The closing value of the S&P 500 on January 1, 2009 was 865. The closing value on January 1, 2019 was 2,607. Those who were winners bought and held on. Those who day traded might have done better or worse. In my opinion day trading is exhausting and fraught with danger. A ten-year positive move is not an anomaly, but it’s not the norm.
Sue, Alecia and I have considered the historic data and believe this is a good time to review the exposure to risk in our clients’ portfolios. Consider the probability that stock markets will continue to grow at the same pace they have in the recent past. The higher it goes and the longer it goes up, the more a decline is a possibility. Interest rates have stayed very low for a long time. At the first whiff of inflation interest rates will likely increase. Increasing interest rates are unfavorable for stocks. Political winds are increasingly blowing in the direction of higher taxes and more government control. These two forces are counter to corporate profitability. Every portfolio should be reviewed at least yearly and rebalanced when necessary. But perhaps the most important is this…our clients from 2009 are now ten years older. According to many in the financial advisory community, the older one becomes the less aggressive one should be.
At Brimmer Financial/National Securities Corp. we have access to the world’s largest money managers, such as Black Rock (the largest manager in the world), Vanguard, Fidelity, Calvert, Eaton Vance, Prudential and most of the well-known managers of mutual funds and exchange traded funds. The managers with the best long-term performance records and the flexibility to help our clients are the arrows in our quivers. Our clients have accumulated assets and want these assets to serve them well throughout their lifetimes and to be able to pass on to the next generations their good fortunes.
At Brimmer Financial we help families and small businesses achieve their financial goals. Our team includes Susan Lemieux, Owner and Manager of Brimmer Financial, RR, IAR; Bob Brimmer, Certified Financial Planner™ professional, RR and IAR; and Alecia Wright RR, B.Sc. Mathematics, University of the West Indies.
The opinions expressed herein are those of Robert Brimmer of Brimmer Financial and are current as of this report’s posting date. This commentary is general in nature and should not be construed as investment advice. Opinions are subject to change with market conditions. The views and strategies may not be suitable for all investors and are not intended to be relied on for legal or tax advice. Please note that any investment involves risk including loss of principal. Interest rate risk is the possibility that the value of an investment will decline as the result of an unexpected change of interest rates. Securities offered through National Securities Corp., member FINRA/SIPC. Advisory services offered through National Asset Management, an SEC Registered Investment Adviser. Fixed Insurance Products offered through National Insurance Corporation.