A 2019 Year-End Guide for Investors

And, a look at what might happen in 2020

Most people may not realize this, but 2019 was the best year for the markets since 2013, which proves nobody can accurately predict what the markets are going to do from year to year. 

On Christmas Eve 2018, the markets were down 20% and yet, a year later, most markets around the globe are up more than 20%. Last year at this time, investors were panicked about Apple’s light iPhone sales and the Federal Reserve Board raising interest rates. At that time, investors were bailing out of the markets in droves.

Fast forward to today: The markets are close to record highs and the U.S. unemployment rate is at 3.5%, the lowest since 1969.

This is the time of year that I start getting questions about what is going to happen in 2020. I usually say that it depends on many variables, including the one black swan event that none of us can foresee today.

Certainly, the trade war, impeachment proceedings, corporate earnings, interest rates and oil prices will be the near-term concerns for investors in the first half of next year. The presidential election will start to become a bigger factor as we get towards summer and certainly in the fall of 2020.

Conventional wisdom has it if a Democrat wins the 2020 presidential election, it will cause a major sell off in the stock market right after the election. However, unless the Democrats maintain control of the House of Representatives and take control of the Republican-held Senate, I don’t see a major sell off because a divided government is usually good for the markets.

So, what can you do as an investor now as you look ahead to 2020?

First of all, if you have taken a lot of gains this year, look at your portfolio for any losses that you can utilize before the end of 2019.

Second, don’t expect 2020 to be a repeat of 2019. Consider rebalancing your portfolio back to where your asset allocation targets were on Jan. 1, 2019.

With such substantial gains in the markets this year, odds are your equity allocation has increased by 5%. In order to reduce some equity risk in your portfolio, it makes sense to sell 5% of your equity holdings to rebalance back to target. For example, if stocks make up 75% of your allocation today because of appreciation, reduce it to 70%. This approach will allow you to capitalize on the gains in stock prices in 2019 and reduce some equity risk heading into 2020.

There is an old adage with investing, you never go broke taking some profits. Now would be a good time to adhere to this sage advice.

Happy New Year!

Categories: Finance