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First Quarter Investment Meeting Notes 2020

First Quarter Investment Meeting Notes 2020

| January 27, 2020
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We have recently completed a full review of the RMR Pillar Portfolios for the First Quarter of 2020. The Quarterly Investment Notes are attached, detailing our reasoning for any changes and our market outlook.

Fixed Income

2019 showed the strength in U.S. spending would sustain U.S. economic expansion. This investment statement largely played out even while corporations are over-leveraged, manufacturing was weakening and the U.S. – China trade deal went through highs and lows.

As 2020 starts, there are signs of steadying global economic growth. Uncertainties like the U.S. – China trade deal and the Brexit vote are now known and priced into the landscape. Uncertainty can still shake the market, however, and the 2020 U.S. Elections and Middle Eastern conflicts are things to monitor throughout the year.

In late August 2019, the yield curve inverted, since that chaotic moment the curve has settled around 15-30 bps. Ten-year Treasury bond yields should move higher in 2020 as recession fears ease. Trade setbacks aside, yields could move back up to the 2.25% to 2.5% area.

Equity

The trend in 2019 was setting record high after record high in the US Equity markets. The economy remains in substantial health with all three major indexes leaping to record highs multiple times in December. The markets were pushed higher by news of a finalized phase-one trade deal between the US and China.

High stock prices were supported by the trio of Federal Reserve rate cuts seen in the second half of 2019. The Fed slashed its benchmark interest rate to spur spending amid global economic uncertainty. The rate cuts also staved off fears that were highlighted by the summer's prolonged yield-curve inversion.

The warning sign, which has preceded every recession since 1950, fueled concern that the bull market was running out of gas. The rate cuts helped pull Treasury yields back into their typical trading window, and recession worries faded as third- and fourth-quarter data releases showed sufficient consumer activity and hiring trends.

The momentum for the stock market rally and Trump’s economy should carry through at least mid-2020. But unexpected events, such as rising U.S.-Iran tensions, have the potential to shake up the markets. Later this year, Wall Street will turn its focus to the outcome of the 2020 election with the risk of a major U-turn in tax and regulatory policy. The chances of a new Fed-rate-hike cycle will be considered at that time.

Takeaways

In the 2020 Q1 Pillar Portfolio review, we found:

  • In part due to strong US spending, the Fixed Income environment has continued to stabilize past the potential economic uncertainties and yield curve worries of 2019.
  • Barring any geopolitical changes, the 2020 Equities outlook remains positive.

First Quarter Rebalance 

Your Pillar Portfolio accounts were rebalanced between the 14th and 21st of January. Rebalancing may be triggered by positions that have materially increased or decreased from their Target percentages, by a change in our allocations, or by an Investment Replacement. For more information on the specific changes to your account, please reach out to your Financial Advisor.

Contact Us

RMR Wealth Builders Inc. is dedicated to closely monitoring the markets for changes in economic trends so that we can help our investors achieve the goals in their Financial Plan. For more information about our Investment Outlook, do not hesitate to contact our staff today. A Certified Financial Planner® Professional (“CFP®”) can be your key to keeping your Financial Planning on track.

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