4th Quarter Client Note

The S&P 500 (Total Return) Index gained 9.07% in 2019’s final quarter. Bringing the advance for the year to 31.49% — and for the decade, to an average annual 13.56%. (And yet, all anybody wants to talk about is how poorly their bonds are performing. The Bloomberg Barclays US Aggregate Bond Index eked out a gain of .18% in the quarter.)

International Developed Markets gained 8.92% for the quarter and 21.51% for the year. While Emerging Markets (the quarter’s leading asset class) gained 11.84% and 18.42% for the year.

Our friends at Dimensional Funds summarize all the numbers in their regular Quarterly Market Review.

SECURE Act Passes

On December 20, 2019, Congress passed the most sweeping retirement legislation since 2006. Included in the last-minute spending bill was the SECURE (Setting Every Community Up for Retirement Enhancement) Act. Back in September, I wrote about one of the most important provisions of the legislation, the demise of the stretch IRA. There are other important provisions, including extending the age for taking first year RMD’s from age 70 1/2 to age 72. I plan to write a more comprehensive piece on the Act for an upcoming newsletter.


You may have seen the news in November in which Schwab is planning to acquire TD Ameritrade in a $26 billion all-stock deal. If completed, this will include TD Ameritrade’s Institutional custodial business for Registered Investment Advisors, like RightPath. Of course, we are following this story closely.

First, the deal is not final and will take 18 -36 months to receive regulatory approval.

Second, it is true that Schwab tends to focus on serving mega-advisory firms and TD has been focused on serving smaller firms. But Schwab announced the hiring of former TD Ameritrade Institutional President Tom Bradley to work on the transition; which gives us great comfort.

Finally, we will do everything possible to see that the integration, when and if it does happen, goes as smoothly and seamlessly as possible.

Looking Back. And Forward

Turning the clock toward a new decade presents a great opportunity to put things in perspective.

Last decade:

When the new decade emerged in January of 2010, we had come through both the dot-com bubble (and crash) in 2000 -2003 (when the market fell nearly 50%) and the real estate bubble (and crash) in 2007 – 2009 (when the market fell 54%). The economic recovery from the 2008 Great Recession was just a few months old.

2000 – 2009 was being referred to as the “lost decade” — with US stocks having lost a cumulative 2% during those ten years. There was tremendous uncertainty for investors. But for those who stayed the course in a globally diversified portfolio, they were rewarded with a 13% return in US stocks and a 5% return in international stocks for the decade.

Last year:

As 2019 dawned, 2018 had produced the worst market return in the previous decade. Prompting many forecasters to predict further losses for 2019. Look what happened? The market was up over 30%. So much for forecasting.

Next year:

The lesson from the past two decades is: Don’t make investment decisions based on short term market forecasts. You surely won’t get one from me. Maintain a sufficient cash buffer. And don’t try to time the market. But rather, determine how much of your portfolio you are comfortable with having in risky assets like equities over the long term and stick with it. But, now experiencing the longest bull market in history, also have reasonable long-term expectations.

Next ten years:

Vanguard’s exhaustive annual Economic and Market Outlook is always a sober read. If you want to skip the analysis and go directly to the meat, here’s their 10-year outlook for global balance portfolios. Their median projection for a 60/40 global stock/bond portfolio is 4.9% – considerably lower than the long-term average of 9.5% since 1970. Meaning: if you’re still saving for retirement you’ll have to save more. And if you’re in retirement, you may have to spend a little less.

Speaking of Vanguard, it’s hard to believe John Bogle, its founder, inventor of the index and my hero passed away a year ago. But his words of wisdom will never die.


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