2020 1st Quarter Investment Bulletin

2019 was certainly a year to remember for investors with the S&P 500 posting the second highest annual return since 1997!

The environment for investing in 2019 proved to be highly accommodating and will likely be remembered as one of the best investing years that many investors have, or will ever participate in. 

There have been other periods of time in which the U.S. stock market has also performed remarkably well. As recently as 2013, the U.S. stock market experienced near record level growth and U.S. stock investors had spectacular market gains between 1982 and 1999. In fact, in that 18-year period, the S&P 500 declined only 1 year out of 18.

However, 2019 was exceptional in that not only did the U.S. stock market have significant gains, eclipsing 30%, but all four major asset classes that make up your portfolio had much better than average years. Investors diversify their portfolios with a goal of reducing risk, while still providing room for growth. 2019 was a great year for investors and portfolio allocators because each asset class generated significant growth. U.S. stocks, International stocks, Emerging Market stocks, and U.S. bonds all achieved gains in 2019 that an investor would gladly accept each year. The table below highlights the difference between 2019 and 2013. 

As you can see, in 2013 diversified portfolios benefited from significant gains in U.S. stocks and developed International stocks but were hampered by losses in Emerging Market stocks and bonds.   By way of contrast, the gains across the board in 2019 were material and significant.

2013 vs 2019 Investment Returns

As we move in to 2020, we are certainly thankful that the markets have remained strong. Forecasts for the economy continue to trend positively and most major institutions forecast encouraging returns for stocks this year.

Portfolio construction at Compass continues to stress diversification and a more moderate allocation to stocks after such a strong year. Detractors have been calling for a correction for the past 5 years, however the market has persisted. We remain optimistic, but vigilant.