Thank you for the trust you have placed in us over the years. For nearly two decades, we have come to work every day with the single goal of helping you exceed your long-term financial goals. Sometimes, that journey can seem quite smooth. At other times, however, the path to your financial future becomes more arduous, and the journey becomes uncertain. The past six weeks have tested everyone’s resolve, as uncertainty about the Coronavirus and its impact on the economy have caused heightened volatility and declining stock prices. Unlike past periods of tumult for the market, this episode has another component – concerns about our health and the health of our families and friends. If the past is any guide, this too shall pass, but it will take time. The stock market and the economy have been tested many times over the past century, and each time they have ultimately come back stronger. For now, though, we would expect uncertainty and heightened volatility to stay with us.
TRYING TO MAKE SENSE OF THE RECENT PAST
Over the past six weeks, market participants have witnessed history being made several times. From February 19th (the all-time high for major indices) to March 23 (the recent trough), the equity market declined 33.9%, the steepest and quickest drop on record. A day later, it began its best three-day run since the Great Depression. Notably, most of the largest one-day moves in the market have come in the middle of a bear market. According to the Bloomberg, “The markets moved an average of 5% per day in March, the most for any month on record.” The unprecedented volatility across all asset classes – from perceived safe havens like gold and Treasuries to riskier assets like stocks and fixed income – has raised many questions for investors. We attempt to answer some of the many questions below. Given the speed at which all of this is taking place and our singular perspective, we don’t have all of the answers. We do have a time-tested process that can act like a roadmap during uncertain times.
Insights
Seeley Capital Q3 2019 Insights
Based on the relatively mundane performance of U.S. stocks during the third quarter, one might be forgiven for thinking that not much went on between July and September. A quick scan of the headlines, however, reveals a multitude of crosscurrents. Geopolitics has kept journalists busy discussing the ongoing “trade war” between the U.S. and China. Throw in the bombing of Saudi Arabia’s biggest oil processing facility and news that the House of Representatives has started the ball rolling on potential impeachment proceedings and there’s plenty to talk about. Beneath it all, though, we think that the number-one issue for the market has been and will continue to be where the economy is headed.
The record-setting U.S. expansion that began in 2009 continues, though the economy has clearly slowed from the stimulus-driven level of 2.9% seen during 2018. At the same time, our work suggests that policymakers may have fewer tools at their disposal to combat slowing growth. For now, our base case does not include a U.S. recession in the near term. We do think the central tendency is for slower growth and a more challenging backdrop for profits. We see low interest rates as the new normal and believe the increased uncertainty could lead to higher volatility.
Seeley Capital Q2 2019 Insights
Market action during the second quarter of 2019 helped shed light on several ongoing themes we have been following:
• First, global growth continues to show signs of deceleration;
• Second, central banks around the world continue to play a major role in driving investor
• Third, responsible savers are hard-pressed to find attractive sources of income.
In these pages, we examine what happened during the quarter and discuss these three themes.
Seeley Capital Q1 2019 Insights
Major risk assets have staged a remarkable recovery thus far in 2019, completing the best quarter in since the recovery began in 2009. Investors jumped back into stocks and riskier bonds after investors’ worst fears about a meaningful economic slowdown failed to materialize at the end of December. This, coupled with a significant shift in stance from the Federal Reserve, prompted investors to drive many major equity indices to near all-time highs. For the three-month period ending March 31, 2019, the S&P 500 climbed 13.65%. Not surprisingly, the rise in risk appetites led to an environment where small-caps outperformed their larger peers. During the first quarter, the Russell 2000, an index of smaller-capitalization stocks, jumped 14.6%. Growth outperformed value during the quarter.