The Legacy Perspective - October 2019

By Steve Wachs,  CFP®

“Worry is paying interest on a debt you don’t owe.”

- Mark Twain

Climbing a wall of worry is defined as a market uptrend that occurs when there is significant uncertainty about its sustainability. Recession. Trade wars. Brexit. Impeachment. Inverted yield curve. These are just some of the names of the bricks in our wall of worry. We are sure new ones will be added as we go through the remainder of 2019.

Many of these same issues were front and center when we began the year. You may recall that December 2018 was the worst December for stock market performance since December 1929. Fear existed that the stock market would continue its downward spiral. So, what occurred? Through 10/25/19, the S&P 500 index is up over 20%. Below is the performance of some of the equity related holdings that are held in many of our clients’ portfolios.

Large Cap U.S. Growth 27.72%

Large Cap International 17.85%

Mid-Cap US Growth 23.70%

Lowes 22.56%

Eaton Corp 26.69%

Hilton Worldwide 34.05%

A case could have been made at the beginning of the year on why not to invest into each of these holdings. Did we have divine knowledge of what would happen? Maybe Matt did, but I sure didn’t. What we knew from our due diligence, research, and factor analysis was that these holdings made sense as part of the equity portion of a portfolio.

This year has also seen many of our fixed income holdings have strong performance. The worries that were present as we began the year in this sector included a threat of recession impacting credit risk, and rising interest rates negatively affecting bond prices. Instead, we have fixed income holdings like a high income municipal bond fund up over 9% and a preferred securities investment up an amazing 15%.

On March 10, 2009 the wall of worry could have been better described as the “Mansion of Mayhem.” The S&P 500 index had retreated to its bear market low after 17 months. It had declined from its peak on October 9, 2007 by over 50%. The term “lost decade” surfaced as investors over the past decade had a zero rate of return. Again, our “magic 8 ball” predicted that equities would soar - that may be a form of revisionist history. 😊 What we did know and communicated back then that now was is not the time to sell. Since that market low, the S&P 500 has set 220 record highs and is within a few points of a new all-time high.

So, are we asking you not to worry? That would be fruitless as many of you will worry about what goes on in the financial markets. However, as one client mentioned, “I pay you guys to worry, so I am going to do less of it.” Are we saying there is nothing to worry about? Absolutely not – just go back and read the last Legacy Perspective. We don’t know what the future will bring. The returns mentioned above could be significantly less by year-end. On the other hand, they could go higher. What we do know is that our financial life planning and investment process provides you the opportunity to achieve and maintain your long-term financial independence.

Disclosures

• Legacy Consulting Group is registered as an investment adviser with the SEC and only conducts business in states where it is properly registered or is excluded from registration requirements. Registration is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability.

• Information presented is believed to be current. It should not be viewed as personalized investment advice. All expressions of opinion reflect the judgment of the authors on the date of publication and may change in response to market conditions. You should consult with a professional advisor before implementing any strategies discussed.

• All investments and strategies have the potential for profit or loss. Different types of investments involve higher and lower levels of risk. There is no guarantee that a specific investment or strategy will be suitable or profitable for an investor’s portfolio. There are no assurances that an investor’s portfolio will match or exceed any particular benchmark.

• Historical performance returns for investment indexes and/or categories, usually do not deduct transaction and/or custodial charges or an advisory fee, which would decrease historical performance results.