4Q2019 Market Review Newsletter

October 14, 2019

4Q2019 Market Review Newsletter

I hope this finds you well and you had a good summer. I want to welcome all of Nick's clients to Integra. If you have questions or you need help, please contact us and we will do our very best to provide you with excellent service and advice. On a personal note, my oldest son has married a lovely woman from Australia where they live.

The broad Morningstar Index is now up 20.4% for the year, up from 14.09% in April. Historical earnings are up 13.87% and projected earnings are around 11%, depending on which economist you read. As I discussed in my April letter, the headlines of recession on the horizon are just not there, based on the economic numbers we are seeing. What we will see this quarter is a LOT of volatility and growth slowing. The manufacturer's index which represents about 12% of the economy, has slowed and a lot of "bears" have pounced on this as a sign of bad things to come.

On the other side, we have employment numbers that are the best in 50 years, and the number of unfilled positions remains high. I should note this is the result of not enough skilled workers. Trying to predict the market is not possible, but looking forward, there are enough positive things that "staying the course" is what we as a firm will do. Where we do see issues is in Europe and Asia. We are discussing reducing our positions there. Brexit and the EU Central Banks negative interest rates are not a good sign of things to come. It is likely that conditions will not turn around any time soon. I see China as problematic on several fronts: Hong Kong, the new supersonic missiles, new submarines, and stealth war drones are a bit of a Sputnik moment. Add to this the buildup of the Chinese Navy and there is plenty to be concerned about! Overall, I see the US continuing its growth, although at a slower rate.

For me, the most important business news was the Business Roundtable announcement that has essentially restated the purpose of a corporation. The roundtable is a group of the largest companies' CEO's who meet to discuss the US economy and public policy.

I quote Jamie Dimon CEO of JP Morgan Chase and Chairman of the Roundtable. (One of the few bankers who navigated the 08 and 09 recession well.) "The American dream is alive, but fraying. Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term. These modernized principles reflect the business community's unwavering commitment to continue to push for an economy that serves all Americans." The new statement goes on to change the primacy of creating value for the shareholders but creating value for all "stakeholders". While this sounds really good, it opens a pandora's box of issues. Milton Friedman wrote a paper in the 1970's basically saying it is a good idea in the short run to be socially conscious but in the longer run leads to "the iron fist of Government". The implications of this statement is way too much for us to discuss in this letter, but it will potentially affect how we invest.

In closing Bill, Keith, Nick, and I thank you and if you have a change in your situation let us know as this may impact how we invest for you.

Yours truly,

Willis Ashby, President and CFP® Integra Financial, Inc.


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