Were The Predictions Right?

With two weeks remaining in 2019, we review a couple of blog posts from 2018. Both were looking ahead to what might happen this year.  Were the predictions right?  Let’s take a look.

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After a Down Year for Stocks, What Happens Next?

Since 1950, there have only been 15 years when the S&P 500 finished underwater including 2018.  With the concerns at the time, most people were wondering if we would see another negative year in 2019. 

We went digging into the numbers to see how often the stock market posted back-to-back negative years, to see what we should expect.

The data showed in the 14 previous events, the stock market finished higher the next year 11 times. And not just positive a little bit. The average gain following a down year was over 17%

Were The Predictions Right

Was the Prediction Right?

It looks like we will be able to say the next year was positive 12 out of 15—barring a major meltdown in the next couple of weeks.  It also looks like the average gain the year after the down year will go up as well.

The Wall Street Crystal Ball

We also looked at how well the big investment firms could predict the future. In fact we even bought our own crystal ball to see if we could get in on the act. 

We showed 12 predictions from the some of the biggest names on Wall Street.  All 12 predicted gains for the stock market.  Here are some of the highlights.

  • The most pessimistic prediction for stocks was a 3% gain.
  • 5 of the 12 predicted single digit returns for the S&P 500, while 7 forecasted double digit gains.
  • 3 of these firms predicted returns of 20% or more.
  • The average guess for all 12 was a positive return of 14%.
  • And the most optimistic prediction was for a 26% gain.
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Were the Predictions Right?

With just two weeks to go, The S&P 500 is up well over 26% for the year. At least crystal balls at a handful of these firms were close.  That’s a pretty big improvement over 2018’s predictions.

What's On Your Mind?

Do you have a question about what’s happening in the world of finance or investing?  Is there a topic that has you curious?  We’d love to hear from  you.

 We’ll do our best to answer it in a future episode.  To submit your question, fill out the form.  If you prefer, you can send us an email directly.  That email address is neal@flemingwatson.com

Enter Your Question Here

Financial Planning

About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

Our Most Recent Videos And Posts

Stocks Climb A Wall of Worry

Stocks climb a wall of worry.

What does this mean? 

Today, we talk about:

  • The news always seems bad
  • Recessions, trade wars and now impeachment dominate the headlines.
  • But the stock market? What has it done.

We’ll talk about it on this episode of Monday Morning Money.

Watch: Stocks Climb A Wall Of Worry

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Each Episode of Monday Morning Money is also broadcast on Local Radio, WMOA (1490 AM and 101.3 FM).  You can hear it at 11:07 every Monday. 

Listen Now: Stocks Climb A Wall of Worry

You can also watch this on our YouTube Channel.

We would love to answer your question on a future episode

Do you have a question about money or personal finance? Submit your question using the form below or send an email to neal@flemingwatson.com

Stocks climb a wall of worry.

What does this mean? Think about all the stuff which has circulated in the headlines over the past year.

A Looming Recession

We continue to deal with the threat of a recession. A major economic slow down can lead to higher unemployment. It can also impact businesses big and small. In some cases, a recession can mean a bear market.

The talk of a recession tends to darken the mood though, and people’s attitudes tend to sour on things like stocks.

Trade Wars

We are still in the midst of a trade war with China. Something many experts feel could contribute to our economic woes. Both countries are taxing goods imported from the other. This serves to drive prices higher for the consumer.

Officials from both countries continue to talk. Unfortunately, nothing has happened, yet.

Impeachment

And now we can add the possibility of impeachment to the list of big things affecting the mindset of the American public. Regardless of where you stand on this issue, it casts a dark cloud over the future.

What the impact will be? Nobody really knows. Since the 1920’s this has only happened twice, with presidents Nixon and Clinton. Nixon’s problems started in late 1972.  The stock market in 1973 and 74 declined nearly 50%.

Clinton’s problems happened in 1997 and 1998.  In both years, the stock market was up over 20%.

So we don’t have a lot of data to help guide us on what to expect.

Wall of Worry
Stocks Climb A Wall

With all the uncertainty, the dismal news cycle, and overwhelming pessimism, what has the stock market done?

Last Monday – the 28th –  the S&P 500 set a new all-time high.

Stocks Climb a Wall of Worry

At that time the popular large-cap index was up over 23% on a total return basis for the year.

Climb a Wall

On the same day, The Dow Jones Industrial Average closed to within less than 1% of it’s all-time high.  

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This is what it means when people say, “Stocks climb a wall of worry.” The doom and gloom surrounds us. In fact, it is hard to imagine there is anything good happening in the world.  But yet, the stock market just quietly marches higher.

Beneath the noise are great businesses. Companies who find ways to improve profits and deliver value to their shareholders. And sometimes it leads to a pleasant surprise waiting for us when the dust settles.

Stay Informed.

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Financial Planning

About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

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Why Do People Run Out of Money During Retirement?

Nearly Half of Americans say running out of money is their primary concern.  So, why do people run out of money during retirement?  

In this episode we will discuss:

  • There is almost never just one singular reason, it is a combination of factors.
  • A major stock market decline is one factor, but it takes more than a bear market to derail retirement.
  • We identify four of the other common factors which lead to disaster.

Watch Now: Why Do People Run Out of Money During Retirement?

Each Episode of Monday Morning Money is also broadcast on Local Radio, WMOA (1490 AM and 101.3 FM).  You can hear it at 11:07 every Monday. 

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What's On Your Mind?

Do you have a question about what’s happening in the world of finance or investing?  Is there a topic that has you curious?  We’d love to hear from  you.

 We’ll do our best to answer it in a future episode.  To submit your question, fill out the form.  If you prefer, you can send us an email directly.  That email address is neal@flemingwatson.com

Enter Your Question Here

Last week AARP published an article. It had the results of a survey conducted by three organizations. They asked workers about retirement. Here are some key findings:

  • Only 36% of Americans were very confident they could retire comfortably.
  • 44% said declining health as a major concern.
  • 49% listed running out of money as their primary concern.

So, Why Do People Run Out of money During Retirement

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The first contributing factor is a major bear market. That includes one like we saw in the great financial crisis or the dot com bust. We could define this as a period where stocks decline 30% or more. Fortunately, these are not a frequent occurrence. Since the 1960’s, it has happened five times.

Many want you to believe bear markets are the sole reason people run out of money. But, that’s not usually the case. There has to be something else at play.  Sometimes those other factors can be more significant.

The Other Contributing Factors To Running Out of Money in Retirement

Run out of money during retirement spending

Let’s start with how much you spend. There are plenty of debates about what constitutes a safe withdrawal rate.  If you talk to ten different financial planners, you might find ten different answers. But you can reach a point where you are taking too much income from your nest egg.  That dramatically increases your risk of running out of money.

Why do people run out of money

The next is when the bad year—or years—happen early in your retirement. There have been many studies about sequence of returns risk. This data shows bad returns early in a person’s retirement can create big challenges.

Reasons 4 and 5

Click to enlarge.

The fourth contributing factor: people get too aggressive with their allocation. The better the stock market does, the more people want to pursue those returns. They often get more aggressive near the top of a market cycle. Growth is important. Remember, increasing your allocation to stocks to pursue returns increases your risk.

The fifth common element is selling low. It is hard to stick to your long term plan when you see your nest egg shrink. The declines can be extreme. Remember this. In every prior instance of a major market crash, stocks have recovered their losses and set new highs. If you sell your stocks at low points, it makes it impossible to participate in the recovery.

Rarely does “one thing” cause a financial disaster for retirement. Creating a plan can help you address these factors and avoid a potential disaster.

Stay Informed.

Monday Morning Money is a podcast talking about current events which  impact your bottom line.  

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Financial Planning

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

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Not As Bad As It Seems

In the investing world, things are often not as bad as they seem. The data doesn’t always match the headlines.  

Today we talk about:

  • August was not good, but was it really bad? It felt really bad.
  • The worst month for stocks (so far) this year is…
  • Have we even had a correction in stocks yet?
  • Don’t look now, but the US stock market is having a really good year.
  • So is everything else.
  • Things also aren’t as good as they look either.
  • The fourth quarter is the “money quarter” for the stock market.

Monday Morning Money: Not As Bad As It Seems

Each Episode of Monday Morning Money is also broadcast on Local Radio, WMOA (1490 AM and 101.3 FM).  You can hear it at 11:07 every Monday. 

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In addition, you can also hear this episode on our YouTube Channel.  Please take a moment to subscribe, as it helps our analytics and improves our reach.  This also appears on Facebook and LinkedIn.  

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August Was Bad, But Not As Bad As It Seems

I’m a big Ohio State Football fan. I admire Jim Tressel who was the head coach for one of the more successful periods in school history. One of the things I can remember him saying in his press conferences, was “things are rarely as good or as bad as they seem.”

You can say the same thing about the investment markets. August seemed like an awful month. We had “headliner” down days of 767, 623, and 800 points. We were bombarded with the negative news. The trade war with china, the inverted yield curve, and the looming recession all dominated the headlines.

It felt like August was a dismal month. If I didn’t keep score, I would have guessed things were far worse than they were. On a total return basis, the stock market, as measured by the S&P 500, was down a little more than a percent and a half. It was not as bad as it seemed.

In fact, August wasn’t even the worst month this year. That distinction belongs to May when stocks declined more than 6%.

(Click image to enlarge)

The Headlines Make it Sound Bad, But It's Not As Bad As It Seems

If you only follow the headlines and sound bites, you may think we’ve had a difficult year. The maximum draw down in stock prices this year is less than 7%. That doesn’t even classify as the textbook definition of a correction. A correction is a 10% decrease in prices. And it is half of the average correction we have seen since 1980.

The endless parade of pessimism makes us think things are worse than they seem. August was not a good month. But, The S&P 500, which is the primary index we use to keep score, is up over 18% on a total return basis through the end of August. 

(Click images to enlarge)

Most of the Major Asset Classes Are Doing Well

In fact, most of the major asset classes we follow have had an outstanding year—so far. Bonds are doing well. Remember last week we talked about the relationship between yield and price. When yields fall, bonds prices go up. And yields continued to fall.

Gold is up more than 18% for the year. And Real Estate is up more than 27% for the year. International stocks are also up for the year.

(Click image to enlarge)

An Interesting Nugget

Over the past 25 years, October has been the 3rd best month for stocks. November has been the 2nd best. And December has been the 5th best. Combined, the fourth quarter has generated an annualized return of 4.3% per year.

Over the past 25 years, the stock market has averaged a gain of 8.9% per year. Nearly half of the return for the last quarter century was generated in the fourth quarter.

(click image to enlarge)

What's On Your Mind?

Do you have a question about what’s happening in the world of finance or investing?  Is there a topic that has you curious?  We’d love to hear from  you.

 We’ll do our best to answer it in a future episode.  To submit your question, fill out the form.  If you prefer, you can send us an email directly.  That email address is neal@flemingwatson.com

Enter Your Question Here

Financial Planning

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

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The Mini Correction of 2019 (so far)

After July 26, the stock market has experienced a mini correction. And the financial media loves a big down day. They plant the seeds of the next financial Armageddon in our minds. Is it time to panic? Today we’ll address the drop and tell you where we are in the big picture.

What's Happening Now: The Mini Correction of 2019 (so far)

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We know a lot of you visiting here may be using a cell phone.  And video uses more data.  If you would like to listen to the audio only version of this, click on the green play icon.

We also posted the graphs below for reference.

Stay Informed.

What’s Happening Now is a podcast talking about current events which  impact your bottom line.  

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Our Most Recent Videos

Creating Your Financial Safety Net

Creating Your Financial Safety Net As America begins to reopen, we can set our sights on what we need to do to get our financial situation back in order. What
Watch Now

4 Ways The Pandemic Could Impact Social Security

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Watch Now

What the Heck is a V Shaped Recovery?

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Is The Bear Market Over?

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A More Conservative Approach

As the stock market and the economy have continued to chug along, we felt it was time for a more conservative approach.  Today we talk about some of the steps we are taking to reduce investment risk for our clients.  

What's Happening Now: A More Conservative Approach (4:36)

What's On Your Mind?

Do you have a question about what’s happening in the world of finance or investing?  Is there a topic that has you curious?  We’d love to hear from  you.

 We’ll do our best to answer it in a future episode.  To submit your question, fill out the form.  If you prefer, you can send us an email directly.  That email address is neal@flemingwatson.com

Enter Your Question Here

Our Expectation: Stocks Will Act Like Stocks

We expect stocks to act like stocks. This means we believe—over the long term—they will perform well. They will generate the returns we need to improve our purchasing power and grow our assets.
 
It also means the growth won’t happen in a straight line. There will be periods of stress and pain along the way.
 
The market is at all time highs. And we haven’t seen a true bear market in over a decade. The current economic expansion is the longest on record. We felt it is time for a more conservative approach.  
 
Here is how we are doing it.

Step 1: Rebalancing

Rebalancing your account means we reset your asset allocation. Here is an example. A couple of years ago, John’s account had 60% of its value in stocks. The other 40% was in bonds. Because the stock market has done extremely well, the stock allocation grew to 65%.
 
Rebalancing his account sells some of the stock holdings and buys bonds. When complete, his allocation is reset back to 60% equity and 40% bonds.
 
In September, we will have an episode of Monday Morning Money about rebalancing.

Step 2: New Core Holdings

 Over the past two months, we have reviewed many of the core holdings in our portfolios. We determined several funds needed to be replaced. One of the by products of these changes was reducing some of the investment risk.
 
One tool we use to help measure the investment risk of our portfolios is a service called Riskalyze.  We measure the risk characteristics of the funds and ETF’s we use.  
 
Riskalzye also helps us to better understand how you feel about the risk and reward.  You can complete a brief survey to find your Risk Number.  There is a link below.  It costs nothing, and it takes 5 minutes or less to answer the questions.
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How Much is Too Much?

How much risk can you tolerate?  Would you be uncomfortable if your portfolio was down 10% in the next six months?  What about 20% or more?  Our 5-minute risk assessment questionnaire (powered by Riskalyze) will help you identify your appetite for risk and reward.  We can then take a look at your accounts to see if your investments align with the results. 

Taxes Matter

Most of these changes will occur in IRA’s or other types of accounts which don’t create a tax bill for you. If there are changes which need to be made in a taxable account, we will call you to discuss the tax implications.

Stay Informed.

What’s Happening Now is a podcast talking about current events which  impact your bottom line.  

If you would like to be notified when a new episode is released, sign up for our mailing list.  Just complete the form.

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Financial Planning

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

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What’s the Worst Month for Stocks?

What’s the worst month for stocks?  The answer may surprise you.  It did me.  We’ll spend the next two minutes talking about it and why it matters.  Here’s a hint, it has to do with the upcoming Federal Reserve meeting.  This is What’s Happening Now.

Podcast: What's Happening Now: What's the Worst Month For Stocks? (2:26)

What's On Your Mind?

Do you have a question about what’s happening in the world of finance or investing?  We’ll create a video or audiocast of the answer and post it here on our website, our Facebook page, and our YouTube channel.

Complete the form to the right to submit your question or comments.

Enter Your Question Here

The Worst Month for Stocks

If I had to guess the worst month for stocks, I would have said January.  As it turns out, August is the worst month for stocks.

Only two months—August and September—have a negative average return.  The rest are positive.

Click on the graph to enlarge

August Has Been Rough – Sometimes.

August has been a bad month for stocks.  But that doesn’t mean you should make any major decisions.  In the past 25 years,  August produced gains in the stock market 17 times. 

Six of the eight times stocks fell during the month, it was ugly. 

Click on the graph to enlarge.

Why does this matter?  The Federal Reserve meets at the end of July.  Most anticipate an interest rate cut.  But if it doesn’t happen, it could start a sell off in the stock market—starting in August.

Stay Informed.

What’s Happening Now is a podcast talking about current events which  impact your bottom line.  

If you would like to be notified when a new episode is released, sign up for our mailing list.  Just complete the form.

Join Our List Today!

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Financial Planning

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

Watch Other Episodes of Monday Morning Money

Catch up on the previous episodes of our weekly video series, Monday Morning Money.  You can also see them on our Facebook page and our YouTube channel.

Our Most Recent Videos

Creating Your Financial Safety Net

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Watch Now

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Watch Now

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Is This The Top of the Stock Market?

The S&P 500 recently closed over 3,000.  And many people are wondering if this is the top of the stock market?  At least one firm believes stocks are headed higher—much higher.  

Podcast—What's Happening Now: Is This The Top of the Stock Market? (3:40)

We have been following First Trust Portfolio’s commentary for some time.  You can read their post about their increased forecast and the methodology they use, here

What's On Your Mind?

Do you have a question about what’s happening in the world of finance or investing?  We’ll create a video or audiocast of the answer and post it here on our website, our Facebook page, and our YouTube channel.

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Enter Your Question Here

Is This The Top of the Stock Market?

As most of you know, we are not in the prediction business.  Most who are have limited success.  But, it rarely stops anyone from trying.  

The stock market will either go up or down from here.  The only way we will know who guessed correctly is to wait and see.  We rarely believe any of them to be reliable indicators of future performance.

We are certainly hopeful the S&P 500 passes the 3,250 mark.  But, if it doesn’t, we won’t be surprised.

Is this the top of the stock market

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Financial Planning

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

Watch Other Episodes of Monday Morning Money

Catch up on the previous episodes of our weekly video series, Monday Morning Money.  You can also see them on our Facebook page and our YouTube channel.

Our Most Recent Videos

Creating Your Financial Safety Net

Creating Your Financial Safety Net As America begins to reopen, we can set our sights on what we need to do to get our financial situation back in order. What
Watch Now

4 Ways The Pandemic Could Impact Social Security

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Watch Now

What the Heck is a V Shaped Recovery?

What the Heck is a V-Shaped Recovery? With many states creating plans to reopen the economy, we keep hearing about the recovery. Experts continue to weigh in on what it
Watch Now

Is The Bear Market Over?

Is the Bear Market Over? On March 23, the S&P 500 closed 34% lower than it’s all time high. Since then, we’ve seen prices rebound nearly 27%. It has many
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2019 Mid Year Update – Wow!

The days have flown by, and it is time for our 2019 Mid Year Update. It’s hard to believe the year  is half over.  In today’s podcast, We’ll talk about how things did in the investment world and share some interesting facts. 

Podcast: 2019 Mid Year Update (7:39)

What's On Your Mind?

Do you have a question about what’s happening in the world of finance or investing?  We’ll create a video or audiocast of the answer and post it here on our website, our facebook page, and our YouTube channel.

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In a Word, “Wow!”

It is hard to imagine getting off to a better start.  Every major asset class surged higher. 

US Stocks

The US Stock market started with a bang.  Following a rough fourth quarter in 2018, all segments of the US stock market have surged to start the year.  Large company, mid caps, and small caps all posted double digit gains.

International Stocks

Likewise, companies outside the US shined brightly. Both developed economies and emerging nations posted strong results.

Bonds

When interest rates fall, as they did in the first half, bond prices go up.  The bond market was solid in the first half.

Alternative Assets.

Real Estate generated the best results of the first half.  Natural resources and gold also produced strong results.

Mid Year Update 2019: The Asset Allocation Quilt

Our Asset Allocation Quilt is always a popular post.  This abbreviated version shows the annual returns over the past several years.  And, it also includes the results for the first half of 2019.

Click on the image above to enlarge.  To see the funds we use as proxies for the asset class returns, click on the image to the left to enlarge.

If you would like to download a copy of the Mid Year Update 2019 Asset Allocation Quilt. Click Here.

Looking ahead to the Second Half....

It was an interesting first half.  Talk of a recession and the ongoing trade war between the US and China dominated the recent headlines.  And the Wall Street “brain trust” remains cautious with their second half predictions.   The average prediction for the second half calls for a flat stock market.  An outcome which would disappoint nobody.  But remember, take those predictions with a grain of salt.  What will happen in the second half of 2019?  Stay tuned.

Two interesting nuggets...

2019 is the Third Year of the current presidential term.  The average return during the past 23 third year’s has been 16.1%.  This goes back to 1927. 

1939 was the last time the stock market was negative during the third year of a president’s term. 

While these tidbits are interesing, they offer no predictive value. As we commonly say, past performance does not predict future results. 

Financial Planning

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

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Complete the form to the right to submit your question or comments. 

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The Inverted Yield Curve

The yield curve “inverts” when yields on short term debt exceed those for long term debt.  Right now the yield for 3 month notes is higher than 1 year, 3 year, 5 year, and 10 year bonds.

This has happened nine times since the 1960’s.  Seven of those periods came before a recession.

Whether it predicts a recession this time remains to be seen.

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Financial Planning

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.