Epidemics: COVID-19 Not the First, Nor the Last
In this report, we offer perspective on epidemics and the equity market turbulence associated therewith as we have long believed that the secret to success in stocks is not to get scared out of them, while we are always focused on the long-term, multi-year prospects of the businesses in which we are invested. Happily, capitalism’s immune system is quite strong.
The Death of Value
While returns for Value stocks were terrific in 2019 and Value turned in a very good decade of returns, Growth stocks have outperformed for a while now, as shown in this report. And while Value may continue to lag Growth in the future, we continue to recommend investments in Value stocks, especially as those stocks trade for what we believe are inexpensive price multiples and largely higher dividend yields.
Turbulent Markets: Act Quickly and Do Nothing
In this report, we identify a few of the most common events which have historically caused temporary market disturbances. These events could easily deter you from staying on track with your long-term investment plan. But historical data suggests that doing nothing can be the best course of action.
Rising Interest Rates and Inflation are Not Fatal
In this report, we discuss the Taper Tantrum in 2013, stock performance during rising and falling rate environments and the Federal Reserve’s inflation and rate targets.
The Most Wonderful Time of the Year
Stock prices will always gyrate up and down, especially as geopolitical events now more than ever drive short-term market moves, but the secret to success in equities is not to get scared out of them. Yes, there are question marks about how strong Q4 earnings will be, but with the economy in OK shape, investor sentiment far from euphoric, the Federal Reserve remaining very accommodative, and corporate balance sheets and income statements generally healthy, we can’t help but be optimistic about the long-term prospects of our portfolios of what we believe to be undervalued stocks.
The Value of Dividends
Dividend income and its reinvestment has comprised a significant portion of long-term stock gain. Dividends today compare very favorably to income that can be generated from competing investments as the S&P 500 yields 1.8%, a smidge less than the yield on the 10-year U.S. Treasury (as of 12.31.19), while the yield for Value stocks (represented by the Russell 3000 Value index) is some 70 basis points higher at 2.5%.
2020 Market Outlook
No doubt, the huge advance in 2019 has many questioning whether the equity market gains can continue in 2020. Hopefully, it should come as no surprise when our answer is that nobody can predict short-term market movements with any certainty and we must always be braced for downturns, corrections and even Bear Markets.