Preview of the 2019 Annual Market Report

Our Chief Investment Officer, Eric Cramer, gives a brief 2018 fourth quarter recap and an overview of the markets going into the first quarter for 2019.

Thanks for listening today. Please join us for one of several upcoming BIP Wealth 2019 Annual Market Report presentations.


JANUARY 24 AT 12:00 PM
JANUARY 31 AT 06:00 PM
FEBRUARY 05  AT 12:00 PM
JANUARY 28 AT 06:00 PM
JANUARY 29 AT 12:00 PM






Now is the Time for Investing Discipline


In July of 2018, we asked “Is this the calm before the storm?”  In October, we asked “Are we in a tech bubble?”  As it turns out the answer to both questions was “yes”.  But we didn’t ask these questions because we knew with certainty that the stock market would fall.  Instead, we asked these questions to create a sense of caution among investors who wanted to overweight their equity exposure and load up on technology stocks.


Looking back over the last two years shows us that investing discipline can offer an immediate, measurable reward.  Staying diversified, taking profits when the stock market runs up, and investing back into the stock market after prices fall, are three of the keys to success.   In 2017 the MSCI ACWI IMI global equity index was up 23.95%.  In 2018 it was down 10.08%.  Sell high, buy low, anyone?


But this really is a lesson for the ages.  Good students of history can take advantage of the past.  Some investors learn things the hard way.

I’ve often told the story of a long-time client who tried to contact me in early 2009 to liquidate his stock portfolio because the Dow Jones Industrial Average had fallen below 7000.  At that point in time the U.S. economy had lost 4.4 million jobs from a deepening recession.  Investors were in shock from the decline in the stock market that had started after the “Dow” peaked at 14,198 on October 11, 2007, just 17 months earlier.


I had met with this client a few months before he called me so that we could review his investing strategy.  It was during this meeting that he revealed his plan to sell out if the “Dow” fell below his target price.  That index had just fallen below 9000 and I pleaded with him to let me help him document a comprehensive investing strategy.  I even offered to help him sell out then, rather than have him wait for possible double-digit declines.


But he was not a humble man and he had been very successful in his career before he retired; and he struggled to accept advice.  He had taken on way more risk than he needed to when the markets were going up, and he had resisted right-sizing his risk target while he had the chance to do so easily.  He didn’t want to pay the government any taxes on his sizeable capital gains.


I was meeting with a different client in my office when the “Dow” fell below 7000, but I saw the caller ID light up with this client’s name.  He didn’t leave a message, so I knew he had hung up and called into our 800-number to sell out at the lowest prices in over a decade.  By mid-2010 the “Dow” had soared past 10,000.  My mid-2011 it was over 12,000.  This client slowly invested back into the market, but he missed his big opportunity.  He wasn’t the only one to sell at a low price; we’re all human beings who make mistakes and many of us proved that in 2009.


Stock market trading volume soared in early ‘09.  On March 9, 2009, with the “Dow” well below 7000, over 43 million shares were traded across 13 exchanges, according to the CBOE.  Notional trading volume was over $215 billion.  We must remind ourselves how stock trading works; it’s simple, really:  someone buys and someone sells.  Did you buy?  Did you sell?  What will you do the next time we get some volatility that causes you to question your investing discipline?


Thanks for listening today. This is Eric Cramer, Chief Investment Officer at BIP Wealth. Goodbye for now and I look forward to seeing you at one of our upcoming Annual Market Report dinners, lunches, or on the webcast.


Disclosure: This communication contains general investing information that is not suitable for everyone and is subject to change without notice. Past performance is no guarantee of future results and there is no guarantee that any views and opinions expressed will come to pass. The information contained herein should not be construed as personalized investment advice, tax advice, or financial planning advice, and should not be considered a solicitation to buy or sell any security. Investing in the stock market and the bond market involves gains and losses and may not be suitable for all investors. The Global Equity index is the MSCI ACWI IMI Index, which is a free float-adjusted market capitalization weighted global index selected as the best available proxy for a diversified stock portfolio consistent with modern portfolio theory. Approximately 55% of the index is comprised of the U.S. stock market and 45% is comprised of international stock markets, including both developed and emerging countries. The “Net Total Return” version of the index is reported here, which means the index reinvests dividends after the deduction of withholding taxes, using a tax rate applicable to non‐resident institutional investors who do not benefit from double taxation treaties. The Emerging Market index is the MSCI Emerging Markets Gross Index. The U.S. Fixed Income index is the Bloomberg Barclays Capital U.S. Aggregate Bond Index, which is a broad-based benchmark selected as the best available proxy for a high quality, diversified fixed income portfolio suitable for a U.S. investor. It is comprised of the Barclays Capital U.S. Government/Credit Bond Index, the Mortgage-Backed Securities Indices, and the Asset-Backed Securities Index. It is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, with maturities of at least one year, and an outstanding par value of at least $100 million. The “Total Return” version of the index is reported here, which means that dividends are included and reinvested. The Dow Jones Industrial Average (DJIA) is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange (NYSE) and the NASDAQ. It is not possible to invest directly in this or any other index.