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Monthly Insights | 2019.09

A wise owl
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Market Recap

It’s been a bumpy summer. From trade wars to the yield curve inverting, economic news has been erratic. Despite that, jobs reports have been reasonably consistent, with unemployment remaining at historic lows.

The last day of May saw the DOW at 24,815, and then in only 6 weeks rose 10% to 27,359 on July 15th. A couple weeks of “no news is good news” went by, and then the President posted a tweet that sent the market spiraling down hundreds of points in roughly 30 minutes.

That’s roughly been the story of summer – no direction, bipolar, and driven more by the President’s tweets than anything else. Bloomberg has a great page on that topic that’s updated constantly here: Bloomberg link

Market Outlook

Our Outlook is “cautious”, driven by the following factors: 

  1. The President. He’s been able to put fear into investors with just a tweet.
  2. Trade wars. Primarily with China, but also others. China is unlikely to get better, and although the US will take its hits, we are in a much better position than they are.
  3. Weak EU-area. Between Brexit looming and a Germany that is effectively in recession, there is no growth here. Oddly, a weak Germany gives the UK more leverage in their Brexit position, but nobody seems to notice this yet. Expect chaos in markets either way.
  4. The Fed. This past 9 months the Fed hasn’t found its footing yet. What it will do next is hard to predict…actually, nobody has been able to predict this Fed. But that could be a good thing in the long run.
  5. Other stuff. Iran, Venezuela, Kashmir, Argentina, Hong Kong, and North Korea all have the potential to turn into bigger things due to their interconnectedness. 

In short, this is reminiscent of one of the early Rocky movies. We might be in the early minutes of the fight with Ivan Drago – there’s many more rounds left.

Quick Tip

ROTH IRA accounts have more limitations than just being 59 1/2 to withdraw funds from them – they also have to be at least 5 years old. If not, you have to pay taxes on the earnings that occurred while inside the account.

The general* rule of thumb:

  1. Younger than 59 1/2, you pay taxes & a penalty;
  2. Older than 59 1/2, but less than 5 year old account, you pay taxes on the gains
  3. Older than 59 1/2 and older than 5 years, you get to keep your money (isn’t the IRS nice! )

*For more details (and yes, this is the IRS, so there are always more details) Schwab has a great summary here: Schwab link

Words of Wisdom

“Remember that reputation and integrity are your most valuable assets—and can be lost in a heartbeat.”

― Charles T. Munger, 
Charlie Munger: The Complete Investor