View from the Chair: Windermere's Market Perspectives (June 2019)

During the first four months of 2019, it seemed as if nothing could get in the way of markets. While uncertainty remained (tariffs, interest rates, economic strength, recession worries), markets ticked higher seemingly every day. In early May, that all changed. See below for market returns during May 2019

While it’s hard to know what caused markets to retreat, the declines appeared to begin with President Trump’s tweets that trade negotiations with China had stalled and that the planned tariffs were going to be implemented. this was a sufficient shock to cause buyers to retreat and sellers to materialize, driving prices down. Since that time, volatility has again returned, markets have pulled back from their highs, and once again, investors may be questioning whether they want to stay invested.


These downward moves never feel good - and sadly never get easier to stomach. However, when they do arise, we remind ourselves of an important adage - “it’s a marathon, not a sprint.”

We don’t view investing as a journey one should take for a month, a year, or even just a few years. We view it as a lifelong process that is ultimately guided by where you are trying to go (ie: simply put - what does your ideal future look like and what financial levels are needed to support that). If you have defined your destination and have a plan in place to reach it (ie: a diversified investment mix and a savings plan), all there is to do during times of market stress is to keep putting one foot in front of the other and follow your pre-determined road.

As you continue down the path, here are a few helpful reminders:

1.) Panic is not a strategy - business media and newspaper headlines will oftentimes incite panic in even the calmest investor. Resist this urge! Oftentimes, the exact moment we feel most encouraged to take action is the worst time to do just that

2.) Revisit your plan - we have worked alongside you to put plans in place to grow your wealth over time, while supporting any near-term liquidity needs. Again, think of assets classes in terms on liquidity buckets. If you have sufficient liquidity stores in your cash/fixed income buckets, short term volatility in equities is unlikely to have any near term impact on your day-to-day life or your long term plans

3.) Over time, investing is on your side - as this insightful chart from Blackrock shows, historically, the longer you are invested in the market, the lower the odds that you will lose wealth. While history may not repeat itself, it certainly has a tendency to rhyme

4.) Don’t miss a few days - this additional chart from Blackrock shows how missing a few major upside days in the markets over time can hurt the compounding of wealth. When will the next one occur? It’s impossible to know, which is why timing the market is so difficult

We know these sharp moves in markets can be unsettling. But when they occur, take a step back, revisit they few key reminders, and keep on running.

Invest on,


Schwab's IMPACT Conference: Top Five Takeaways


I recently attended Schwab’s IMPACT conference in Washington DC. IMPACT is a conference for independent advisors that custody assets at Schwab (like Windermere). The three day agenda is filled with education sessions on the markets, economy, and our practices as well as high profile keynote addresses and opportunities to connect with money managers, Schwab personnel, and other service providers. It’s an excellent conference and I thought it was only fair to share some key takeaways from my time in our nation’s capital

1.) Polarized government - Greg Valliere has been following DC politics for over three decades and shares his input at IMPACT every year. His main point this year was that the center of politics has vanished. Both parties are more polarized than ever and there is increasingly less desire for any cross party negotiations. He anticipates the house will turn to democrats in the midterm elections but that the senate will stay with republicans, resulting in more gridlock and polarization in DC for the next two years. (Greg sends a daily email sharing his insights. You can subscribe here)

2.) Trade concerns abound - but China moves forward - Many speakers expressed concerns over the ongoing trade negotiations with China. Concerns are centered around the uncertainty it is causing in the markets, as well as the possibility that it will slow US growth and potentially lead to a recession sooner than would otherwise occur. Money managers focused on China expressed similar concerns over trade. However they presented a strong case for investment in China - largely driven by the consumer story. Chinese citizens are experiencing record earnings (up 120%), high savings (average 35% of income), and low levels of leverage. Chinese government is also still willing to be very accomodative and stimulative

3.) Words of Advice from Former White House Chief of Staff - Andrew Card (Cheif to George HW Bush) was joined on stage by Dennis McDonough (Chief to Obama) and the two shared stories and advice from their time in the White House - as well as gave their perspective on the current administration. Card offered some advice his grandma had given him that could arguably benefit most of us: “Taste your words before you spit them out - and don’t leave the room before you go out the door.”

4.) Fed on track - According to Former Chair of the Federal Reserve Janet Yellen, the Fed is on a reasonable track. Yellen’s tone was measured and thoughtful. She noted that in her view, the economy is doing very well and that a recession doesn’t appear imminent. However, she stressed that the Fed is seeking to keep economy from overheating (read - higher inflation) and will continue to raise rates gradually. Rates at the short-end, adjusted for inflation, are still effectively at zero and the Fed will likely target a real rate closer to 1% (which has historically been closer to 2%). Her main concerns include trade and the pressing need for entitlement reform

5.) Equity & Fixed Income Outlook - Schwab’s equity outlook was cautious. Concerns over trade and inflection points in certain economic data lead to a market weight to equity asset class in their view. Anticipation is that we have some runway left (especially post mid-terms which tends to be a strong cyclical period) but that we are late cycle. Over moderate term (6-18 months), prediction was that value, international, and large caps will lead. On Fixed Income side, Schwab anticipates ongoing volatility and spread widening. They stress that it’s time to add some duration (as long rates are close to near-term peak), focus on quality, and remain close to home (ie: US debt)

As always, it was a very worthwhile conference and we appreciate the ongoing guidance and support from Schwab in helping us better serve our clients