The behavior of equity markets in the first quarter of 2019 was nearly the mirror image of the fourth quarter of 2018. Global equities rallied strongly with U.S. stocks leading the way, reversing the sharp U.S.-led downturn in the fourth quarter. After falling by -13.52% in the fourth quarter of last year and by -4.38% for all of 2018 including dividends, the Standard & Poor’s 500 Index returned +13.65% in the first quarter of 2019, its best quarterly return in ten years. The S&P 500 ended the quarter just 3.3% shy of its all-time closing high established on September 20, 2018.
A long term investor usually has two time horizons in mind when thinking about investing – what will happen over the next twelve months (tactical) and what will happen over the next twenty years (strategic). Tactical thinking should take into account liquidity needs over the next year, current fundamental or valuation concerns and/or a buying reserve for expected opportunities. The strategic is normally the easier question to answer because of market history.
As with many debates, the argument over “active” versus “passive” investing seems too simple. We’d actually like to highlight three investment categories, delineated by expected return. We think that we are the middle category of “passive” investors “actively” picking stocks.
Is the Stock Market More Volatile Due to Its Focus on Economic Conditions?
There has been no shortage of uncertainty lately. The Government partial shut-down, the US-China trade war, and Brexit have featured most prominently in the financial headlines. Rising interest rates and a weak stock market have only added to the worry that a greater market downturn could be around the corner.
Déjà vu on Marginal Tax Rates?
From 1940 to 1980 the United States highest individual marginal tax rate never went below 70%. We have been there before.
“When top rates were high there was always a large gap between the stated rates and what the highest earners actually paid as a percentage of their income.”
Keep Calm and Carry On in US Public Equity Markets
Here is a headline that you would not expect to see. Proudly for most Woodstock clients it shows how smart you are. “In the gloom that hung over the financial world in 2008, it would have been difficult to imagine US stocks were poised to embark on their longest bull run in history.
The S&P 500 Index was volatile in the first half of the year through June, and tallied returns that were a little better than break-even at the mid-year mark, +2.6%. The Dow Jones Industrial Average (DJIA) was slightly negative at -0.72%, and the tech-heavy NASDAQ Composite Index was the mid-point winner, up a strong 9.36%. In the third quarter markets accelerated in July and August before slowing in September.
What You Don’t Know About Social Security Could Hurt You
In discussing various tax advantaged programs with the next generation there is nothing as important as their understanding the US social security program. A recent article discussed what most Americans don’t know about social security. The key idea is that you need to work to benefit: “monthly benefits are calculated based on your 35 highest years of earnings”.
There is current interest in the effect of the new tax law changes on investment fees. Before discussing deductibility, investment fees have always had to be justified. For assets managed at a firm like Woodstock, the ownership of individual equities, not in a pooled investment structure, allows the investment manager to use asset allocation, tax considerations and turnover, in other words use the levers available, to effectively save as much as the management fee might be.
Woodstock Quarterly Newsletter / Summer 2018
The S&P 500 Index returned 2.65% through mid-year, recovering from its modest loss in the first quarter and remaining below its January high. Large capitalization internet and technology shares continued to dominate performance, with Alphabet, Amazon, Apple, Facebook, Microsoft, and Netflix accounting for 99% of the S&P’s modest gain. Seven of the S&P 500’s current eleven sector classifications were down through mid-year.