As you may know the SECURE Act was signed into law on December 20, 2019. This landmark piece of retirement legislation could have an impact on decisions you may want to make regarding your retirement savings strategy. click here for a one-page summary that highlights some of the key changes as well as some additional detail regarding the specific provisions. 

Please feel free to contact us at info@cornerstonewmi.com or 925-824-2880 if you would like to discuss how these changes may impact you.

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Happy New Year! What a difference a year makes. One year ago the stock market was plunging and came perilously close to ending what has become the longest bull market ever recorded. In December 2018, dropping stocks were suggesting an increased risk that a recession, or market crisis, might be on the horizon. Confidence in investing fundamentals coupled with attractive stock valuations helped keep a focus on long-term investing objectives in the face of short-term volatility.

One year later with 20/20 hindsight, what appeared to be a bullish forecast for stocks may have been too conservative, and now we’re asking if stocks have come too far, too fast. December 2019’s stock market environment has been in some ways the opposite of December 2018’s. After a strong rally that has lifted stock valuations, the question now is whether investing fundamentals can to continue to support 2019’s gains throughout 2020.

Stock market fundamentals have improved significantly over the past year. We’ve received clarity on the biggest market uncertainties: U.S.-China trade relations, the Federal Reserve (Fed) pivoting from rate hikes to rate cuts, and the United Kingdom’s exit from the European Union (Brexit). We’ve also seen a leadership transition at the European Central Bank and more production cuts by Saudi Arabia-led OPEC to help stabilize oil prices. These actions plus reduced trade tensions in other key international economies could be viewed as evidence that economic growth outside the United States has stabilized and may even be starting to pick up a bit, although it is not assured.

Investors have priced in a lot of this good news, and it’s possible that some potential 2020 gains have been pulled forward into late 2019. Stocks may need to be repriced over the next several months as investors wait for the economy and corporations to deliver against pricing, and that wait could be uncomfortable at times. Corporate earnings growth will likely be the driver of stock market gains, but that still may depend on more progress in trade negotiations. Negotiations on “phase two” of the U.S.-China trade talks could become bumpy, and that could lead to additional turbulence in the stock markets. Inflation could also pick up and trigger renewed fears of Fed rate hikes, although a slight increase in inflation is a sign of a healthy economy. Fallout from the impeachment, international economic data in decline, and the potential for a highly charged U.S. election also could lead to increased market uncertainty this year.

While the strong market performance of 2019 may limit the magnitude of potential market advances in 2020, stock market gains are still possible this year. A Fed committed to keeping interest rates at current levels and progress on trade can improve prospects for business investment and productivity growth. To help prepare for what may be a dynamic—and possibly volatile—year ahead, please read LPL Research’s Outlook 2020: Bringing Markets Into Focus

Best wishes for a healthy and prosperous New Year, and please contact me if you have any questions.

Important Information

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results.

The use of Stocks and Markets herein are referencing corresponding indexes, unless otherwise noted. All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

Economic forecasts set forth may not develop as predicted.

All data is provided as of December 31, 2019.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

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Hindsight is 20/20, but finding clarity in future uncertainty can be fuzzy. 2019 has been a very rewarding year for investors. One year ago after publishing Outlook 2019 we were all tested with market volatility, and that’s a reminder that we need to continue to be prepared for uncertainty in the markets.

As we look forward to the year 2020 and a new decade, some key trends and market signals will be important to watch. These include progress on U.S.-China trade discussions, slowing global growth, an encouraging outlook from corporate America, and continued strength in consumer spending. To help keep it all in focus, LPL Research Outlook 2020: Bringing Markets Into Focus offers investment insights and market guidance through the end of 2020.

As Outlook 2020 explains, progress on trade remains central to growth projections. LPL Research expects 1.75% U.S. gross domestic product (GDP) growth in 2020, which reflects the potential for continued trade and geopolitical uncertainties amid the expected gradual slowing of the economy at this point in the economic cycle.

The bond market also is expected to show a modest increase in longer-term yields, supported by continued flexibility by the Federal Reserve in setting interest rates. LPL Research’s year-end 2020 forecast for the 10-year U.S. Treasury yield is a range of 2–2.25%.

Expectations for better corporate earnings growth in 2020, along with continued economic growth in the United States, could support stocks at current valuations. After the strong market gains thus far in 2019, corporate earnings may be the primary driver for stocks next year. The LPL Research team calculates that the S&P 500 could increase by mid-single-digits, consistent with profit gains, by the end of 2020, and they believe mild inflation and still-low interest rates will support these valuations. At the same time, we are mindful of our position in this extended business cycle, and we’ll be on the lookout for signs of moderation.

Together we will continue to monitor the impact of trade negotiations, the upcoming elections, and keep an eye on developments around the world. The LPL Research Outlook 2020 is here to help, bringing some clarity to a complex investing environment and providing insightful commentary to support investment decisions during the year ahead.

If you have any questions, please feel free to contact Cornerstone Wealth Management.

View Market Outlook 2020 Digital Version

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IMPORTANT DISCLOSURES

Our 2020 year-end fair value target range for the S&P 500 is 3,250–3,300. We base this year-end target on a trailing price-to-earnings ratio (P/E) of 18.75, which we multiply by our 2020 S&P 500 EPS forecast of $175. We believe mild inflation and still-low interest rates support these valuations. Please see the full Outlook 2020 publication for additional description and disclosure.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. The economic forecasts set forth may not develop as predicted.

The Standard & Poor’s (S&P) 500 Index tracks the performance of 500 widely held, large-capitalization US stocks. All indexes are unmanaged and cannot be invested into directly.

The PE ratio (price-to-earnings ratio) is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher PE ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with lower PE ratio.

Earnings per share (EPS) is the portion of a company’s profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company’s profitability. Earnings per share is generally considered to be the single most important variable in determining a share’s price. It is also a major component used to calculate the price-to-earnings valuation ratio.

Gross Domestic Product (GDP) is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.

This research material has been prepared by LPL Financial LLC.

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