Registered Investment Advisor
900 Walt Whitman Road, Suite 208
Melville, NY 11747
 (631) 923-2485
Investment Newsletter - Q2 2019

The difference from three months ago to now is a perfect example of why as an investor, it is essentially a fool's game to try to determine (guess) the short term direction of the stock market. As the very down 4th quarter of 2018 took away earlier gains from the year, and helped turn it into being a negative year overall, the most optimistic of forecasts for 2019 predicted a low single digit positive return for the calendar year. We did not find any major investment company to make a prediction for double digit returns in the first quarter, which is what we had.

Just like when the market does poorly we do not want to jump to conclusions for changing the long term prognosis, the same goes when the market does extremely well also. We can not let short term results influence long term plans.

We give more detail on the past quarter and outlook further below. If you would like, we also have a link to a Q2 2019 Global Market Outlook by Russell Investments. To see the full report, click here .

In this issue of our Investment Newsletter:

  • Our current investment topic is: A Strong Case: Equal Weighting vs The Dividend Aristocrats

  • An overview of recent market activity, along with Our Perspective...

  • Access to our updated ADV brochure for year-end 2018

  • A reminder about IRA contributions for 2018

  • A recap of the performance of major market indices from the past quarter 

  • Strange, fun, and scary facts about money

  • Upcoming Economic Calendar

You will find past investment articles, by clicking the Articles tab above, or directly on our website, found under Periodicals. 

If there is a topic of interest you would like to see covered in the future, please reply back to this email to let us know, or  click here . Likewise, if you have any questions on this or anything else, feel free to reply back.
Investment Topic

A Strong Case: Equal Weighting vs The Dividend Aristocrats

For our investment topic, "A Strong Case: Equal Weighting vs The Dividend Aristocrats" we attempt to give a high-level overview of the topic. To learn more, please  click here
Our Annual ADV

As per Securities and Exchange Commission (SEC) requirements, attached is our annual ADV brochure.  To access this, please click here . If you would like us to email or mail a hard copy, please feel free to call or email us to let us know.
IRA Contribution?

If you are eligible to make IRA contributions for 2018 (Traditional IRA, Roth IRA, SEP-IRA), and have not done so, the deadline of April 15 th , is fast approaching. Many firms request that it be submitted by April 10 th .  If you are unsure about your eligibility to contribute, please let us know and we will explore your individual circumstance. 
Our Perspective on Recent Market News and Activity
Our synopsis of the past quarter, a look ahead, and putting it all in perspective:
1 st Quarter 2019 in Review : Perhaps the stock market and the groundhog both saw something in common this year, and that was a strong rebound and an early spring! What a difference a quarter makes, and the gloom and doom that rang out the end of the year in 2018, quickly faded away into a very strong first quarter. We can start by thanking still relatively new Fed Chairman Jerome Powell and the central banks for walking back some of his earlier comments about raising the Fed funds rate and transitioning to more of a dovish tone. That “mea culpa” helped to put a stop to the declines and helped fuel another new rally in an overall bull market that is now in its 10 th year. U.S. stocks notched their biggest quarterly gains in nearly a decade. The rebound was also fueled by investors stepping back into stocks after a selloff that many considered overdone. Some have called for the Fed to go even further, with National Economic Council Director Larry Kudlow saying recently that he would like to see the central bank lower its benchmark federal-funds rate by half a percentage point to help protect the U.S. economy. Major indexes have now recouped almost all the losses they suffered in the final months of 2018, when fears about an economic downturn sent markets sliding around the world. 

Positive performers in the first quarter were the S&P 500 Index , up 13.07%, The Dow Jones Industrial Average up 11.15%, Russell Mid-Cap Index up 16.03%, Russell 2000 Index (Small Cap) up 14.18%, MSCI EAFE (International stocks) up 9.04%, MSCI Emerging Markets up 9.56%, Bloomberg Commodity Index +5.70%, and DJ US Select REIT Index up 14.64%.  On the bond side, the Barclays US Aggregate Bond Index was up +2.16% and the Barclays Municipal Bond Index was up +1.84% representing a strong bounce back for bonds.

Looking forward to Q2: The big question remains, “Are we heading into a recession or does this economy still have more time to grow?”  We consistently hear from many, that the pullback during Q4 2018 was more of a growth scare or a pause, and that the next recession is still a few years away. Yet others continue to be wary of risks like continuing trade talks between the U.S. and China, uncertainty over Brexit and a further pullback in eurozone growth. 

Who is right? Only time will tell. When 2019 started, things were not looking too good. The government shutdown, inclement weather, and worries about the stock market weighed on the economy. Economists at Goldman Sachs estimated gross domestic product was on track to grow at a rate of just 0.8% in the quarter. But recently, the University of Michigan reported its index of consumer sentiment rose to 98.4 in March from a preliminary reading of 97.8 in January. This can be an early indication that the economy’s first-quarter soft patch was, in fact, a patch, and that the second quarter will look a whole lot better. If the case, it would likely still take time and a run of good data before policy makers at the Federal Reserve consider moving off their current dovish track. It probably wouldn’t be until June before economists could say with real confidence that the economy has come back. Coupled with the GDP bouncing back and forth between quarters, it could take even longer to get a sense of the underlying trend. So even if the economy does well, the Fed might not make any noise until sometime in the summer. Renewed strength in the economy, plus having the Fed off their backs, is a very nice set up for investors. Eventually the Fed could take the punch bowl away, but for now the drinks are on the house.

Investors need to be realistic, however. Big climbs in the S&P 500 have tended to slow or even reverse in the three months following a first-quarter rally of 10% or more, according to Dow Jones Market Data. Often, the gains pause as investors grow wary that prices have risen too high, too quickly, and that some of the expectations which helped fuel the rally may not pan out. Some investors may look to take some profits. This is a key reason why we re-balance accounts quarterly at a minimum. Issues around trade, monetary policy, or corporate earnings could be stumbling blocks in coming months. Some investors are worried that a slowing U.S. economy is already weighing on corporate bottom lines and clouding the case for share prices to keep rising. 

As we often say, all of this short-term noise and trying to guess which way the market will be heading in the near term, is often just a tremendous waste of time, energy and focus. Investing should always be about the long-term. A long-term investment is one that is generally defined as being at least across a full market cycle, which can last between 7-10 years. Our economy will undoubtedly suffer a recession in the future. Historically a recession occurs once every 5-6 years or so. We are overdue to have one, and you could also use that frequency to estimate that every year has an approximate 20% chance of a recession. So, what does that mean? Well some recessions are mild, while others are more severe. The last recession was a very severe one, the worst experienced since the Great Depression. Our hope is that investors use that very difficult period between October 2007 to March 2009 as a great lesson that even when things look extremely bleak, the storm clouds eventually lift, and growth is just around the corner. For most investors who had a well-diversified portfolio, had they not sold out during that 2007-2009 time period they would have been back to break even within a few years’ time frame, and then would have climbed to much higher highs. Let’s take a hypothetical investor who had the tremendous misfortune of putting all of their money into the S&P 500 in September of 2007, which I would equate to getting onto the Titanic just before it hit the iceberg. If that investor just rode through and did not sell out during those very difficult years, they would still have realized an average annual return of 7.2% over the following 10-year time frame. While yes, that would still have been lower than a normal historical return, this illustrates the value of staying invested over time and certainly a 7.2% average annual return is still not too bad. The main point being, to use history as your guide and your friend, and allow time to grow the assets vs. trying to bet on the day-to-day short-term noise. 

Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.
Major Market Indices
Below is the Q1 '19 price return performance of some of the major indices:
Strange, fun, and scary facts about money
One of the worst investments the government makes? Making a penny is a money losing proposition for the mint. Estimates are it costs about 1.5 cents to make the 1 cent coin!
More Monopoly money is printed every year than US currency . How much more? Approximately 30-50 times more, depending on the year.
The average American has less than $5,000 in a financial account. That was in a 2018 survey by Bankrate. Also in the survey, those aged 55-64 who have retirement savings, the amount is $120,000.
15 percent of the households in the U.S. have net wealth less than or equal to zero . This is from a recent report by the Federal Reserve Bank of New York.
Are you in the top 1% of income in the U.S.? Per the IRS in 2017, it was slightly more than $480,000.
Are you in the top 1% in terms of money in banking and retirement savings accounts in the U.S.? The median is $1.13 million, and the average is $2.5 million, per MagnifyMoney through surveys by the Federal Reserve and FDIC.
Only 8% of the world’s currency is actual physical money.  The majority of transactions are all done digitally so no physical currency exchanges hands.
Why do quarters and dimes have ridges? People used to “shave” the edges of the coins when they were made of pure metal. Merchants had to weigh the coins to make sure they were receiving unshaved coins. The ridges made it almost impossible to shave them.
On the Investment Horizon
Upcoming Key Dates on the Economic Calendar 

  • First Friday of each month: Unemployment report for the prior month, released at 8:30AM.

  • Wednesday, April 10 - Federal Open Market Committee (FOMC) releases minutes of previous meeting at 2PM.
  • Friday April 26 at 8:30AM - GDP, 1st quarter 2019 (advance estimate).
  • Tuesday, April 30 - Wednesday, May 1: The Federal Open Market Committee (FOMC) meets, and releases their announcement on Wednesday at 2PM.

  • Wednesday, May 1 at 2:30PM - Fed Chair Jerome Powell to hold his press conference to explain the FOMC's latest projections and stance.
  • Wednesday, May 22 - Federal Open Market Committee (FOMC) releases minutes of previous meeting at 2PM.
  • Monday, May 27 - Memorial Day: NYSE closed. 
  • Thursday, May 30 at 8:30AM - GDP, 1st quarter 2019 (second estimate); Corporate Profits, 1st quarter 2019 (preliminary estimate)

  • Tuesday, June 18 - Wednesday, June 19 - The Federal Open Market Committee (FOMC) meets, and releases their announcement on Wednesday at 2PM.
  • Wednesday, June 19 at 2:30PM - Fed Chair Jerome Powell to hold his quarterly press conference to explain the FOMC's latest projections and stance.
  • Thursday, June 27 at 8:30AM - GDP, 1st quarter 2019 (third estimate); Corporate Profits, 1st quarter 2019 (revised estimate).

If you desire an appointment, have any questions on any of this material, or any other financial subjects may relate to your own financial circumstance, please reach out to us at the contact information below:
Brian Cohen, CCO; email: ; phone: 631-923-2487
Chris Congema, CFP®;  email: ; phone: 631-923-2486
Joe Favorito, CFP®; email: ; phone: 631-930-5336

Direct office email:  
Direct phone: 631-923-2485

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 Landmark Wealth Management, LLC
900 Walt Whitman Road, Suite 208
Melville, NY 11747
 (631) 923-2485