mABC Investment Advisors, LLC

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Quarterly
Client Letter
 
January 2020 Edition 
    
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Markets Close the year on Record Highs 
... But major index's gain starts from negative position 

No doubt 2019 stock market gains will go down as one of the better ones in history with the S&P 500 returning about 30%.  While this gain is helped by corporate tax cuts and overall good economic conditions, the stellar return bears a closer look at the starting point back in January 2019.  

With hefty returns of this past December, it is easy to forget tthe major pull back in December of 2018 when the markets dropped 15% from December 1st to Christmas Eve of 2018.  While markets did recover somewhat before the New Year, returns for the month were still in negative territory (down 9%) from December 1st to December 31st and did not fully recovery to the same levels until the mid February 2019.  This increase of 11% from January 1st to the  mid-February accounted for about 1/3 of the indexes 2019 yearly gain of nearly 30%.  

Perhaps a better measure than the 2019 calendar year would be to start the look at the 12 month period of Dec 1, 2018 through Nov 30, 2019 to see the effect of the December 2018 correction. The following table shows a comparison:

Jan '19-Dec '19 Dec '18- Nov '18 Dec '18- Dec '19
Indexes 
  12 months
12 months
 13 months
S&P 500
29%
14%
18%
Dow
22%
10%
13%

You might recall in late 2018 there was a significant fear of a recession in the near future after the Fed raised rates and the China Trade war was in full swing.  In early December 2018 I had taken a conservative position and moved most of your assets to cash to protect gains.  Fortunately this action was taken prior to the 2018 Christmas Eve Correction and preserved some of your gains during the downturn.  

In early January, while the markets were still about 10% down I put about 50% of your assets back to work.  During the 2nd quarter I put another 30% back into the market for the Aggressive and Moderately Aggressive portfolios. During the 3rd and 4th quarters I made further investments as it seemed trade war with China was finally settling and ended the year with most portfolios invested 90% as outlined below:

Agreed 
Account
Strategy
Bond Investments
Equity Investments
Cash Investments
Aggressive*
0% 90% 10%
Moderately Aggressive* 15% 75% 10%
Moderate 25% 65% 10%
Conservative 40% 30% 30%
* Top Market Sectors in these strategies may include:
   Communications Services, Financial Services, Technology and  Industrials  
   as well as investments in  Small and Mid Cap  exchange traded funds
   Smaller accounts (<$25K) use single diversified ETFs to achieve objectives.

So, how did your well diversified accounts perform in comparison over these same periods?  As a result of being mostly in cash during the 2018 Christmas Eve Correction, we benefited by being able to put money to work after that downturn.  While the full year 2019 performance of the indexes looks stellar, they only represent the largest companies in the US.  If you consider their negative starting point and look at the 12 or 13 month period including the 2018 Christmas Eve Correction, your well diversified accounts (as described in the above table) performed quite well.

mABC 
Jan '19-Dec '19 Dec '18- Nov '18 Dec '18- Dec '19
Portfolios**
12 months
12 months
13 months
 Aggressive
16%
10%
13%
 Mod Aggressive
12%
7%
10%
 Moderate
8%
6%
8%
 Conservative
6%
4%
6%

** Above Portfolio results are actual example account performance for each strategy that had minimal capital flows during the year and did not have client requested cash holds. Individual accounts will vary based on deposits and withdrawals during the year and cash holds requested. 
Check your   mABC Client Portal   for your specific account performance.

So what does 2020 hold in store? I believe caution is still advised.  So far in January we have seen nice gains but also some major pull backs (Dow down 435 just on Monday of this week).  You can tell when investors are getting a little jittery and think the market may be near a peak. When so, a scare like the China corona-virus can hit the markets hard.  

We are also facing a presidential impeachment trial in the US Senate and are in an election year with proposals by some candidate that could radically change the US economic platform, if implemented.  And, only the first phase of a China - US trade platform has been agreed.  If progress gets unraveled, expect market impacts.  Great Briton has agreed to exit the European Union, significant issues remain with Iran and Iraq, and global climate change initiatives could all impact economic growth in the short term.  Any of these can undermine markets at least in the short term.  Still the US is on a steady growth path with low interest rates and low unemployment, for now.  

As always, I will continue to monitor markets and make adjustments to your portfolios as conditions warrant.  And I am happy to discuss our respective views in general and your account and investment needs specifically.
Below you will find inserted the Quarterly Commentary by Ryan Walsh.  In this edition he covers the following:
  • A summary of Global Market Performance for the 4th Quarter
  • A primer on the pros and cons of government spending in "Modern Monetary Theory" 
  • A comparison of how China manages it's economy vs the US in "The Fiscal Silk Road" 
  • The trouble with only considering asset correlations in "The Grand Scale of Things" 
  • An outlook for the future in  Look Forward to 2020
Read more by clicking:   4th Quarter 2019 Commentary 



Here is wishing you a happy, healthy and prosperous New Year and I hope you had a happy holiday season with family and friends. As always I welcome feedback on this publication and am happy to try and address any topics you might find of interest.  

All the best, 
  Mike Michael L. Andries CFP(r)
 
Michael Andries, CFP®                           
mABC Investment Advisors, LLC

+1.713.777.0260 Houston / Galveston Area  
    CFP Marks


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Please review these disclosure was well as your investment company's quarterly statement (e.g. Fidelity, TD Ameritrade or your 401k provider) to confirm you account activity and balances at least quarterly.
 Economic factors, market conditions and investment strategies will affect the performance of any portfolio and there are no assurances that any portfolio will match or outperform any particular benchmark. Investing in Emerging and Frontier International Markets involves special risks, such as currency exchange and price fluctuations, as well as political and economic risks. Commodities may be subject to greater volatility than investments in traditional securities and may be affected by overall market movements, changes in interest rates, other non economic factors such as weather, disease, and embargoes, as well as international economic and political developments. Past performance may not be indicative of future results. All investment strategies have the potential for profit or loss.  
 
The information and opinions expressed herein are obtained from sources believed to be reliable and up-to-date; however, their accuracy and completeness cannot be guaranteed. Opinions expressed reflect judgment current as of publication and are subject to change.  Information in this document is directed toward U.S. residents only.   mABC Investment Advisors, LLC is registered as an investment adviser with the states of Texas and Louisiana and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements.