January 2020 - The Road Ahead

David L. Johanson |


  • Blockbuster 2019 for stocks
  • Stable interest rates
  • Invent your future


2019 will be a tough act to follow with those lofty returns.  The Dow Jones Industrial average rose 23% in 2019, while the S&P 500 climbed 29%.  Even the oft maligned International Markets, as measured by EAFE were up 21%.  The Barclay’s Aggregate Bond Index increased 8.7% during the same time.  We will happily take it, after a sub-par 2018.

One of the lessons we take from the 2017-2018 stock market swoon is that patience does pay off.  With the S&P 500 up an average 13% per year since that time, patient investors were rewarded.  On the other hand, those who were emotionally spent and decided to hide cash under their mattress, missed the boat.  Never give up on the power of capitalism and the ingenuity of the human spirit.  In the years ahead, we will continue to invent new things as productivity advances us into the next decade.

At the end of a decade, we look back and consider the noteworthy events which cause us to pause and view things differently.  We never would have predicted some of these occurrences:

  • Donald Trump won the Presidency
  • Death of Osama Bin Laden
  • Russia annexes Crimea from Ukraine
  • The unemployment rate fell to 3.5%
  • Apple’s invention of the iPad
  • Britain decided to leave the European Union
  • Facebook became more valuable than G.E., AT&T, and Citigroup combined
  • The U.S. became the world’s largest energy producer
  • Same-sex marriage became the law of the land
  • The Chicago Cubs won the World Series
  • #MeToo Movement

In 2030, ten years from now, we will discover other surprising events that shape our future.  As Yogi Berra once quoted, “It is tough to make predictions, especially about the future”.  However impossible it is to predict the future, we will provide a few thoughts, later in this newsletter.

Current Economy

“It’s literally the most conducive environment for economic growth and strength that I’ve ever seen,” stated billionaire hedge fund manager, Paul Tudor Jones.  This “Goldilocks” economic environment should remain intact into 2020.  The not too cold or hot scenario shows inflation low and monetary policy stable.  The Federal Reserve left interest rates alone and hinted they might remain that way for the foreseeable future.

There is encouraging news for rank-and-file workers.  A strong labor market makes the bargaining power of lower paid workers favorable.  Wages are rising faster than years past which is huge news for the lower and middle-class worker and wonderful news for the consumer and spending.

A year ago, we had all kinds of worries - rising interest rates, slowing economic growth, escalating trade war, and an aging Bull market run.  Yet, the market climbed that proverbial wall of worry.  

We have different risks today.  The U.S. seems late in the economic cycle.  Valuations are not as cheap as they were one year ago.  

The assassination of the second-most powerful man in Iran is unsettling.  As a citizen, I am very concerned.  As an investor, the effects, over time, will not likely be as bad as feared.  We read the headline news but when it comes to investing, we look at the economy, the Fed, the Consumer, and jobs creation numbers, along with other variable events which could change sentiment.  Jamie Dimon, the CEO of JP Morgan, recently stated, “This is the most prosperous economy the world has ever seen and it’s going to continue.”


  • Stock prices may have come too far, too quickly.  With higher P/E ratios, earnings have less margin for error.  We would not be surprised to see some rebalancing in January, anticipating a little volatility at the start.
  • Iran will avenge their slain General.  Neither country wants an all-out war, but markets will be more volatile with the headline worries.
  • Data suggests the demand for stocks should remain strong, even though global growth may slow down.
  • We do not think a recession is imminent.  The Bank of New York’s recession model, which calculates the odds of us having a recession in 2020 is at 21% during the next 12 months.  We concur.
  • If the Brexit headwinds begin to clear, and the German economy sees improvement, it would support the European economy as a whole.  Any weakness in the U.S. Dollar could also further propel international markets, potentially reversing a decade of underperformance.
  • Bond yields remain low as central banks keep policy loose.
  • Despite a fiercely partisan split, the November 2020 Presidential election will result in a divided government and little dramatic change.
  • Our advice remains the same.  The bull market is not yet done.  Buy on the dips.

Final Thoughts

“The best way to predict the future is to invent it,” said Alan Kay.  Regardless of the upcoming events that shape our future, we have the ultimate control over our financial lives.  Right now, developing the proper asset allocation for the next ten years and beyond, is critical.  Keeping our spending habits, in keeping with our recourses, is pivotal.

As a firm, we are thrilled to be able to assist you with all your fiscal needs and resources.  We look forward to helping you meet your financial goals for decades to come. So, let’s raise a glass to a prosperous decade and wishing you peace, love, happiness, and prosperity in 2020!