As we celebrate a ten year old bull market it is worthwhile to see how we got here. Yogi Berra called it correctly with his statement, “It’s tough to make predictions, especially about the future.” At a press conference on March 3, 2009, it was at the time President Obama who said, “What you’re now seeing is profit and earning rations are starting to get to the point where buying stocks is a potentially good deal if you’ve got a long term perspective on in.” The stock market hi its low point less than a week later on March 9, 2009. On that day the S&P 500 closed at 676. The S&P 500 closed at 2743 on March 8, 2019, which makes for a 306 percent gain, according to Yahoo Finance.
The president also expressed optimism that hiring and business investment would pick up. But it wasn’t until June 2014, over five years after the president’s high hopes for hiring that the economy fully recovered all the jobs lost during the Great Recession, according to CNN Business, March 9, 2015.
We begin the 11th year of a bull market with the market opening on March 11, 2019. The date is interesting on a couple of fronts. First, President Donald Trump proposed a record $4.7 trillion federal budget for 2020 on Monday. This president is counting on an optimistic 3.1 percent economic growth projections, along with accounting adjustments, and steep domestic cuts to balance future spending in 15 years. Trump’s argument is that the nation is experiencing “an economic miracle.” While the national debt is $22 trillion, the deficit is likely to hit $1.1 trillion in fiscal year 2020, the highest in a decade. Trump is certain the tax cuts will fuel robust growth. Some economists, however, submit the tax cut bump is flattening, as they see slower growth in the coming years. What concerns this observer the most is the piling on of even more debt by this administration with no planned correction.
The second reason the second Monday, March 2019 is notable is there is an increasing number of economists on Wall Street who are downgrading their expectations for U.S. first quarter growth. December’s retail figures dropped sharply which may be an indication consumers are losing their enthusiasm for spending. “The nearly $21 trillion U.S. economy relies heavily on consumer spending, which comprises about ⅔ of gross domestic product,” according to yahoo Finance, March 11, 2019.
A number of those who watch the economy have tempered their expectations for growth during the first three months of this year. The Q1 GDP is ”tracking very weak,” Goldman Sachs opined. Capital Economics suggests that consumer spending “is likely to remain unusually weak in the first quarter.” As some suggest overall GDP growth will slow to below 2%, others see softer retail data that GDP could check in at 1.5% in the first quarter. Last month, the Atlanta Federal Reserve forecasted “that fourth quarter 2018 growth would fall under 2 percent, well below the government’s initial estimate of 2.7 percent and short of President Donald Trump’s self-imposed target of 3 percent,” reported Yahoo Finance.
Rather than believing hope is a strategy and optimism is an investment foundation, let me suggest that you review your portfolio expectations. Greg Davis Vanguard Group Chief Investment Officer sees “near 50-50 chance of recession in 2020,” said on CNBC February 11. 2019. Davis said further, “Our expectations around U.S. equity markets if for about a 5 percent median, annualized return.” Now is the time to do for your portfolio what your car’s GPS does when you miss a turn, ‘Recalculating…’
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