Summary | Second Quarter 2019
The strong returns enjoyed early in the year could largely be considered a bounce back from the extreme weakness experienced at the end of 2018. The additional gains in both stocks and bonds during the most recent quarter, however, were more likely attributable to speculation regarding what the U.S. Federal Reserve policy and activity may be going forward. Expectations of potential rate cuts and easier financing conditions allowed investors to at least temporarily suspend fears related to global trade conflicts and signs of a slowing economy. With interest rates and bond yields falling back to near historic lows, stocks were the “only game in town” for investors targeting high rates of returns.
With bond yields historically low and equity valuations expensive it is reasonable to ask where markets may go from here. A trade deal with China, additional fiscal or monetary stimulus, or an easing in geopolitical concerns could all push markets higher, but it would be imprudent on our part to ignore the rising risks from higher prices and stretched valuations. This reminds me of a quote from revered value investor Howard Marks in his book The Most Important Thing –
“The value investor thinks of high risk and low prospective returns as nothing but two sides of the same coin, both stemming primarily from high prices”
Like any investor we enjoy and appreciate when markets move higher. Rather than become satisfied or complacent, however, we must recognize what that means for future returns and be willing to adjust portfolios accordingly.
Contact Brad Swinsburg 404-874-6244 if you’d like to discuss any of the articles featured in our 2019 second quarter CFO report.
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Unless stated otherwise, any estimates or projections (including performance and risk) given in this presentation are intended to be forward-looking statements. Such estimates are subject to actual known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from those projected. The securities described within this presentation do not represent all of the securities purchased, sold or recommended for client accounts. The reader should not assume that an investment in such securities was or will be profitable. Past performance does not indicate future results.