Category: Investment Planning

1st Quarter 2021 Market Commentary

Note: This market review was published on May 3rd, 2021 and may not be reflective of current market or investing issues.

The first quarter saw strong equity returns in the US with the S&P 500 up just over 7%1. International markets lagged the US, with the MSCI ACWI ex US increasing almost 3.6%2.  Under the surface, there was a rotation of leadership that took place in the market from growth to value assets.  Many of the large cap growth companies, that were up strong following the COVID-19 crash, have begun to lag the more cyclical companies.  The largest company in the world, Apple, has experience two 20% drawdowns in the last six months3.  In spite of the declines in large cap tech companies, like Apple, the broader market has been able to push to all time highs because of this rotation. Along with the rotation from growth to value, small cap stocks have also started to outperform large cap names.  It begs the question “what’s going on?” 

The simplest way to answer that is the expected, and ongoing, economic recovery.  With the rollout of the COVID-19 vaccines in the United States going better than expected, and states beginning to reopen their economies, economic activity is increasing.  When there is strong economic growth, along with expectations that growth will continue or accelerate, value stocks tend to outperform their growth counterparts and small cap stocks tend to outperform large cap. 

There are still a few concerns that could de-rail this economic recovery.  First of all, while the vaccine rollout in the United States has been faster and more effective than most thought it would be, countries around the world are not seeing the same success. If other countries are not able to increase the speed of their vaccinations, their economic issues could affect our economy due to how intertwined global trade is.  Second, it seems that every few weeks there is another variant of the COVID-19 virus that pops up somewhere around the world.  We have seen the UK variant that seemed to have a higher transmission rate, the South African variant that seemed to have a higher fatality rate, and now there is an Indian variant that has started to spread.  If one or more of these variants are found to be transmittable despite one being vaccinated, then we could end up seeing mask mandates, social distancing, and lockdown protocols being issued again, which would at best slow the economic recovery and at worst send us into another recession.

While the economy seems to be off to a strong new expansionary period, there are also concerns as to whether or not the expansion is sustainable once fiscal and monetary support are scaled back or removed.  Currently, the Federal Reserve Bank of the United States has their primary interest rate set between 0% and 0.25%, making capital very cheap for businesses that need it.  The federal government has been spending money at a record pace in order to support businesses, state and local governments, and individuals.  Unemployment insurance has been expanded to support more people, at a higher level, for longer periods of time. Direct payments have been sent to individuals who meet certain income requirements, state and local governments have received monetary support due to decreased tax revenue, and businesses were able to apply for PPP loans that for many were forgiven.  Once these support systems of the economy begin to fade away it is unclear if the economy will be able to stand on its own. 

Additionally, with the amount of spending that has been seen there is an increased fear that inflation could see a meaningful increase for the first time in well over a decade.  There have already been a few companies that have come out publicly and said that they are going to have to raise their prices due to increasing costs that they have seen over the past few months.  If these trends continue, inflation could exceed the Federal Reserve target of 2%, which they have said they would welcome based on their new average inflation target.  It is important to know what the effects would be if inflation were to see a sustainable increase of over 2%.  Some of the first effects would likely be commodity prices and interest rates rising, and the value of the US Dollar declining.  What would this mean for asset prices though?  Bonds, especially treasuries, would decrease in value as interest rates rise. Stocks would most likely have a mixed reaction.  Growth stocks that have done so well over the past decade, especially those that have not proven profitable, would likely struggle as the cost of capital rises for them and they are no longer able to fund their growth with cheap debt.  Value stocks, especially those that have higher pricing power, would likely benefit from the strong economic growth and increased spending of consumers. 

While there will always be more questions than answers when it comes to future performance in markets, we can use current data and historical references to make informed investment decisions.  As the supposed quote from Mark Twain goes, “history doesn’t repeat, but it does rhyme.”

1https://www.cnbc.com/quotes/.SPX

2Morningstar.com

3https://www.cnbc.com/quotes/AAPL?qsearchterm=aapl

Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by  Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.

4th Quarter 2020 Market Commentary

Note: This market review was published on December 28, 2020 and may not be reflective of current market or investing issues.

As 2020 comes to a close, it is a good time to reflect on how markets have performed throughout the year.  There has been a multitude of external factors that have had an impact on markets this year that include, Brexit, COVID-19, U.S. Elections, and a trade war.  With all of these in mind it is hard to imagine that here in December we would be at or near all-time highs in U.S. equity markets. With that said, investors have had record amounts of support both from monetary and fiscal authorities around the world.

With all of the negative effects that COVID-19 has had on the global economy, as of December 15th, the S&P 500 is up more than 13%1, the NASDAQ is up 39%2, and the Dow Jones Industrial Average is up 5%3 from the beginning of the year. Other asset classes have also done well this year; gold is up 19%4 for the year while silver is up 34%5.  However, not all assets have had a great year, the U.S. Dollar has fallen a little over 6%6, and WTI Crude Oil is down over 15%7 after being priced negatively in April.

Central banks around the world have provided unprecedented support to markets this year.  The Federal Reserve Bank has gone beyond just the purchasing of U.S. Treasury assets, and has purchased both mortgage-backed securities and corporate debt.  This amount of support was needed to provide liquidity in a time when companies were unable to get the funding that they needed in order to continue to operate.  The Fed also lowered their overnight lending rate to 0% and has expressed their intent to keep the rate at or near 0% for an extended period of time. 

What is really different about the response this time, as opposed to the Great Financial Crisis, is that federal governments around the world have taken a much more aggressive fiscal stance in response to the shutdowns.  In the United States, our Congress passed the CARES Act in March that allocated $2 trillion to different programs to support the economy.  Some of those programs included direct payments to certain individuals and families based on prior income, loans to businesses to support payroll, and funds to industries that were severely affected by the virus (i.e. airlines). In addition, Congress has also passed additional funding of $908 billion to further support the economy.

While these programs are indeed needed after the economy was all but closed entirely for months, it is not yet known what type of long-term effects they will have on our economy and markets.  With the amount of money being printed and spent by the federal government, we expect that inflation will increase, leading to higher commodity prices. Returns for broadly diversified portfolios will vary from year to year but are likely to be depressed over the next decade as we have essentially borrowed against our future returns to fuel this year’s dramatic rally. Fixed income will be one of the most difficult places to allocate funds as rates around the world are near or below 0%, although interest rates are poised to head higher if inflation does start to increase over the next few years.

Sincerely,

Longview Financial Advisors, Inc.

1https://www.cnbc.com/quotes/?symbol=.SPX

2https://www.cnbc.com/quotes/?symbol=.IXIC

3https://www.cnbc.com/quotes/?symbol=.DJI

4https://www.cnbc.com/quotes/?symbol=@GC.1

5https://www.cnbc.com/quotes/?symbol=@SI.1

6https://www.cnbc.com/quotes/?symbol=.DXY

7https://www.cnbc.com/quotes/?symbol=@CL.1

Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by  Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.

3rd Quarter 2020 Market Commentary

Note: This market review was published on July 15th, 2020 and may not be reflective of current market or investing issues.

The first half of 2020 brought volatility back to the markets that has not been seen in a decade.  Not only did we see the fastest 30% decline in the history of the U.S. equity markets, but in the second quarter, markets staged a nearly equal rally.  As of the end of the second quarter the NASDAQ had reached an all-time high, the S&P 500 came within less than 5%1 of reaching its all time high, and the Dow Jones Industrial Average came within 8% of its all-time high2.  This rally was led by technology stocks and those that facilitate the movement toward a work from home culture in the United States.

The equity market rally in the United States has been faster and stronger than seen in other markets around the world, and has also happened while the economy has suffered some of the worst performance in decades.  Unemployment skyrocketed from less than 5% to more than 14%3, the Gross Domestic Product (GDP) of the United States is expected to decrease by more than 35% in the second quarter4, more than 8.5% of homeowners are currently not making their mortgage payments5.  The U.S. stock market seems to be almost completely disconnected from the real economy.

If the stock market really is so disconnected from the real economy, then what is fueling the markets strength? There are a few things that are going on that are supporting markets. First, is the amount of stimulus being provided by the Federal Reserve Bank (the Fed) and the Federal Government.  Second, the amount of COVID-19 cases may be rising, but the death rate in the U.S. has continued to fall.  Finally, there have been many announcements by pharmaceutical companies like Moderna, Novavax, and Pfizer around treatments and/or vaccines for the Coronavirus.

The stimulus from the Fed and from the Federal Government is already at levels that we have never seen before.  They have taken their overnight lending rate to 0%, as they did during the Great Financial Crisis in 2008, but they have also increased their Quantitative Easing program to include both investment grade and non-investment grade corporate debt.  They have bought billions of dollars of U.S. Treasuries, mortgage-backed securities, and corporate bonds in only a few months’ time.

As states began to reopen from their lockdowns throughout the second quarter of the year, we have started to see a dramatic rise in new cases of COVID-19.  While this is a concerning statistic, there is a silver lining that has helped the sentiment in the stock market, and that is that the fatality rate has continued to decline.  The first few weeks of July will be critical for this, as the number of deaths do tend to lag the number of cases.  If we do not begin to see an increase in the fatality rate, we can expect the trend to continue.

The news that has continued to have the largest effect on the U.S. market is optimism around a vaccine or treatment that is effective against COVID-19.  There are currently multiple companies that are researching a vaccine, and research has shown that Remdesivir (a drug made by Gilead) decreases the severity of the disease and the length of a patient’s hospital stay.  This is important as one of the biggest concerns about this pandemic was that hospital systems may be over-run.  The faster that patients can recover and be released from the hospital, the faster a bed and supplies can be open for another that needs them.

While there has been a lot of good news lately, it is important to remember that there is a lot that we still do not know about this virus and that we will likely not know for months to come.  The fatality rate has come down, viable treatments have been found to decrease the length and effects of the disease, and the economy is beginning to re-open and show signs of life.  We have a long way to go, but for now it looks like the worst may be behind us.

Sincerely,

Longview Financial Advisors, Inc.

1: https://www.cnbc.com/quotes/?symbol=.SPX

2: https://www.cnbc.com/quotes/?symbol=.DJI

3: “Civilian Unemployment Rate,” U.S. Bureau of Labor Statistics, June 2020, accessed July 02, 2020, https://www.bls.gov/charts/employment-situation/civilian-unemployment-rate.html

4: “GDPNow,” Federal Reserve Bank of Atlanta, July 02, 2020, accessed July 02, 2020, https://www.frbatlanta.org/cqer/research/gdpnow

5: Adam DeSanctis, “Share of Mortgage Loans in Forbearance Increases to 8.55%: Mortgage Bankers Association,” MBA, June 16, 2020, accessed July 02, 2020, https://www.mba.org/2020-press-releases/june/share-of-mortgage-loans-in-forbearance-increases-to-855

Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by  Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.

Coronavirus (COVID-19) & Market Volatility Update – At War (April 9th, 2020)

Note: This market review was published on April 9th, 2020 and may not be reflective of current market or investing issues.

Wars can be very inconvenient and last a long time.  Around our office, we feel we are fighting wars on two fronts; one a health care war and the other, an economic war.

Health Care War – Obviously, this is not our area of expertise, so when life is threatened, one should at least find an expert.  Dr. Scott Gottlieb is one and in his recent editorial in the Wall Street Journal this past Monday, he lays out the two ways drugs are being developed in the near term: antivirals and antibody therapies.  Both of these approaches could be ready before a vaccine, which is probably still a year away.  These two drug approaches would help to blunt the ferociousness of Covid-19, while the hope is that a vaccine would prevent the illness altogether.  And while we are hopeful for any help, Dr. Gottlieb extends our return to normalcy much farther than our politicians, at least until year end.

Economic War – At least we have a little better understanding of the recession we have entered, and the bear market that started last month.  This bear market is very purposeful and self-inflicted; the slowing down, and in some cases, stopping economic activity to slow and hopefully, stop the spread of the virus.  The health care fallout created by the virus is staggering and dire; the economic cure will be just as dire. As we watch the normal monthly and quarterly statistics, so far, the real numbers (unemployment) and the estimates (GDP) are off the charts to the down side.  A bear market usually follows three stages: 1) a down-side drop (or in this case, a crash), 2) an equity rally off the first low set (sometimes retracing ½ of the initial drop) and finally 3) a consolidation phase that takes the market down at least to retest the initial low, and in some cases takes the market well below the original low point.  Some bear markets are relatively short (nine months) and some may last over three years, like the tech bubble from 2000 to 2003.  The 2008 crisis lasted 18 months, from October 2007 to March 2009.  Longview’s primary thesis is that we are currently in the upside bounce phase, which is being materially supported by Congress and our Federal Reserve Bank.  While the news of Covid-19 should get slowly better over the next six to eight weeks, the economic news may get significantly worse, bad enough to constitute the third stage, a new testing of the bottom.  Early on, many economists have theorized that the economy may start growing again in the late third quarter, possibly September or October of this year.  Our feeling now is that it may take much longer.  Richard Bernstein, in a recent Barron’s article wrote: “At bottoms, people just assume that horrific performance is going on forever and nobody wants to invest.”  The same feeling many of you felt in early March 2009! Protecting your capital is our primary responsibility, and while we don’t know for sure where the market is going day to day, history is an excellent guide.

Many thanks for your continued confidence in Longview.

Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by  Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.

2nd Quarter 2020 Market Commentary

Note: This market review was published on April 8th, 2020 and may not be reflective of current market or investing issues.

2020 started off with a continuation of the longest bull market in history, but it didn’t last long into the new year.  The major U.S. Indices hit their final high of the bull market on February 18th, 2020, and it was quickly downhill from there.  It took slightly more than a month for the S&P 500 to reach its recent low of 2,191.86, a decline of more than 35%.1  This included the fastest 20% decline in its history, multiple days of futures trading being stopped at their maximum loss and gain, multiple tests of the market “circuit breakers” that pause trading for 15 minutes when the index falls by 7%, and some of the best and worst single days in the history of the market.  The first quarter of 2020 was truly one for the history books.

We are living through a time that will be talked about for generations.  We are in a health crisis the likes of which have not been seen for more than 100 years, and it is having drastic effects on the economy.  A new virus that currently has no cure, no vaccine to prevent, and no heard immunity; it is truly a perfect storm.  This virus has lead governments across the globe to take measures that only months ago we would have likely considered unthinkable.  Global supply chains have been shut down, countries have banned travel, thousands of businesses in the United States have been forced to close, and millions of Americans have already lost their jobs.  Unfortunately, this is only the beginning, and it is likely to get worse before it gets better.

The Federal Reserve has thrown everything it has at the markets in order to try and dampen the long-term effects of this crisis.  They cut rates by 1.50%, all the way to 0%, and all of the cuts were made during emergency meetings.  In addition to rate cuts they also announced multiple assets purchase programs which include buying treasury bonds, mortgage backed securities, municipal bonds, and for the first time in history, investment grade corporate bonds.  The Fed is not alone.  The federal government has also passed a massive stimulus bill of more than $2 trillion, which includes direct payments to American tax payers.

To add to the uncertainty, there was also stress on the global energy markets.  At their latest meeting, the Organization of the Petroleum Exporting Countries failed to come to an agreement with Russia on production cuts.  This led to an oil price war, with Saudi Arabia increasing production to their maximum capacity and dropping prices.  The price of oil has seen a dramatic drop since that meeting falling to a low of below $20.  This has put significant stress on U.S. energy companies which require a price much higher in order to produce a profit on their oil drilling operations. 

With all of the uncertainty surrounding the COVID-19 outbreak and the oil price war it is difficult to understand the effects that will be seen in the economy and the financial markets, both short and long term.  With that said, volatility is likely to remain high over the coming months while investors digest economic data, company earnings, and continued economic shutdowns.  It is also probable that some small businesses that have been forced to close will not be able to reopen and some of those that have lost their jobs will not see those jobs return.  The one thing that is certain is that this crisis is going to have real and lasting effects on our economy and on our population. 

We wish all of our clients, friends, and family health and safety during these uncertain times.

Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by  Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.

Coronavirus (COVID-19) & Market Volatility Update (March 25, 2020)

Note: This market review was published on March 25th, 2020 and may not be reflective of current market or investing issues.

I hope this finds you well.  Jon Meacham, today on a news show, was referring back to the phrase in the Declaration of Independence: life, liberty and the pursuit of happiness.  Certainly it is no coincidence that Thomas Jefferson put the word life first.  As Americans, we find ourselves fighting two wars at the same time in our own backyards.  If history is any guide, without prioritizing one over the other, we might very well lose both.

Obviously, the first war is the one against the Covid-19 virus, the one threatening our lives.  When I wrote to you just two weeks ago, this virus was just getting started in the U.S.  Now, while China and South Korea seem to have greatly contained the virus, the United States seems to be the new epicenter and on a trajectory steeper than that of Italy.  This is as serious as it gets.  We all have a collective responsibility to follow the guidelines set out by healthcare professionals, those doctors and scientists who have the training and understanding to see us through this.  This may take three or four weeks longer and be much more inconvenient, but the lives of our families is certainly worth the price.

The irony here is that if we are following doctors’ orders, we make the other war, the economic crisis worse in the short term.  Our government, as I write this, and most other developed governments are throwing everything they have in the way of stimulus at this problem, with little or no regard for sequencing or the longer term consequences.  And while their efforts may not stave off a recession, their collective work should shorten a downturn and blunt its negative effects.  To a large degree, that is what we have done with your portfolios: by creating a cash buffer, we have slowed the downside dramatically.  That said, your March statement will still look pretty ugly!

Now the question is how do we get back into the market safely.  This is a true, ferocious bear market, with huge swings both downward and upward.  I wish I could say we think this is over. We don’t think it is, but we do think we are closer to the bottom than the top.  In late March 2009, Jeremy Grantham of GMO fame put out a letter entitled “Reinvesting When Terrified”, and while we are certainly not terrified, putting money (risk) to work in uncertain markets goes against human nature.  So be it; you will find us putting cash back to work strategically over the next several weeks and months, primarily using a dollar cost averaging rather than a lump sum strategy.

Again, as we navigate the pitfalls of the global markets over the coming months, should you have any questions about either our investing process, our thoughts on the economy or your own financial planning, please don’t hesitate to contact your advisor.  If we all do our part, we will eventually get through this crisis.  Many thanks for your continued confidence in Longview.

Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by  Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.

Coronavirus (COVID-19) & Market Volatility Update (March 9, 2020)

Note: This market review was published on March 9th, 2020 and may not be reflective of current market or investing issues.

Erik Larson has just released a new biography of Winston Churchill entitled The Splendid and the Vile.  It documents the one year from May 10, 1940 to May 10, 1941, the period in which Nazi Germany overran France and began the bombing of London.  During this perilous time “Churchill’s great trick was his ability to deliver dire news and yet leave his audience feeling encouraged and uplifted”.

There is an investing concept we first heard during the 4th quarter of 2008: “the permanent impairment of capital”. During that recession, where the S&P 500 fell 50% over 18 months, this concept was loosely defined as losing no more than 20%.  We feel it is imperative to protect capital when it is called for and especially not to injure financial plans so much that they may never recover.  While the S&P 500 recovered in four to five years, it did so from a base of inexpensive equities and much government stimulus.  This time around equities are expensive, bonds even more so and global central banks have spent most of their stimulus.  We have been de-risking all of our managed portfolios since late January, from only 7% for aggressive accounts to 39% for moderate accounts.  So going into this Coronavirus crisis, we felt we were reasonably prepared, but its effect on the U.S. economy may be deeper than we thought.  That said, the Covid-19 crisis may dissipate quickly over the next three to four months if China and South Korea are any indication.  But it also may leave our economy, along with other global economies, in a much weaker state, much more so than even at the turn of this year.

As we navigate tough markets over the next several months, should you have any questions about either our investing thesis, the economy in general or your own financial planning, please don’t hesitate to contact your Longview advisor.  We try to build resiliency into our portfolios and planning for times like these, and while we might not have Churchill’s knack for encouragement, this crisis will also eventually pass us by.  Many thanks for your continued confidence in Longview

Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by  Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.

Coronavirus (COVID-19) & Market Volatility (February 28, 2020)

Note: This market review was published on February 28th, 2020 and may not be reflective of current market or investing issues.

In his brief essay yesterday, Woody Brock, one of our research partners, wrote that the Coronavirus is truly an “unknowable unknown”.  And while we are all sympathetic to those who have died, or are sick and possibly stranded, the stock market around the world can be brutal when there is not enough information to make an informed decision.

Longview, as investment advisors, has the same access to information as any other investors around the world. So far, this information has been vague and inconclusive.  Global markets have corrected this past week faster than at time in the history of the S & P.  We, along with most other investors, have watched as the situation went from a local Chinese problem to a global panic.

We have been tracking the downturn since last Friday, February 21, and aggregate portfolio losses have been about half of the market losses.  Many of you will remember our philosophy of “grow and protect” and we feel the “protect” mode is prudent now.  Many investors are attuned to buying the dips, but as in late 2008, when you don’t know where the floor is, we would rather wait.  Your capital and ours is too hard earned to be anything but prudent.  You will see in your portfolios where we, as we understood the unfolding gravity of this global panic, have exchanged “growth” assets for “protect” assets.  It is our opinion that a resolution to this situation will not be quick, but could take months or longer, not only longer to overcome the virus, but to also re-establish global trade.

We are never happy to add additional turmoil to your lives by changing investments within your portfolios, but taking a lesson from 2008, we feel it prudent to do so.  As always, thank you for your confidence in our abilities.  Please don’t hesitate to contact us with questions.

Sincerely,

Longview Financial Advisors, Inc.’s Investment Team

Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by  Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.

1st Quarter 2020 Market Commentary

Note: This market review was published on January 14th, 2020 and may not be reflective of current market or investing issues.

In contrast to major lows at year end 2018, the end of 2019 saw major U.S. indices at or near record highs. The fourth quarter saw much lower volatility than the middle of the year as the markets continued mostly higher with only a few minor pullbacks along the way. Many of the risks that were influencing markets throughout the year are still relevant today; however, most of them have shown signs of moving toward a resolution.  There have been more negotiations in the U.S.-China trade war, and they are finally showing signs of progress, tensions in the Middle East seemed to have peaked for now, and the latest deadline for Brexit is less than a month away.

In their fourth quarter meeting, the U.S. Federal Reserve stopped the interest rate easing cycle, for now, and left their benchmark rate alone following three consecutive cuts during the year. The future path for the Fed is still in question however.  Chairman Powell has said that the three cuts during the year were simply a mid-cycle correction to interest rates and do not point to a long-term easing cycle.  Although the Fed has stopped their interest rate cuts for now, they have been forced to continue to increase their balance sheet through an asset purchase program in order to continue to provide liquidity to overnight lending markets.  While it continues to be talked about as a short-term issue, there has been continuous intervention through the fourth quarter and plans to halt the asset purchases have continued to be delayed.

The trade war between the U.S. and China is finally starting to show progress and talks are finally starting to look like they could bring results over the coming months.  The first phase of the deal has been verbally agreed to and is expected to be signed in mid-January.  While many details of the first phase have not been shared publicly, it is expected to include China increasing purchases of U.S. agricultural products and increasing intellectual property protections, while the US is likely to end any tariff increase. That said, phase two of a long-term deal could be years away.

Geopolitical tensions continue to be a threat. Protests in Hong Kong have continued throughout the past few months, despite the government removing the controversial extradition bill that provided the initial spark for the protesters.  While the first of the protester’s five major demands has been met, in the removal of the bill, the remaining four have seen little interest from the government. In the Middle East, following U.S. airstrikes on Iranian-backed rebels, protesters occupied the Green Zone in Iraq and were able to break into the compound surrounding the U.S. Embassy.  While the situation de-escalated after a few days, the United States then killed Iranian General Qassem Soleimani, to which the Iranian military responded by launching rockets at bases in Iraq that house American troops.  While there were no casualties reported in the attack, it showed that Iran is willing to use military force if they deem it necessary. This has been reported as the end of the retaliation from Iran and both sides seem to be standing down, for now. Over the next few months global growth could begin to rebound off of recent lows due to the stimulus that has been provided over the past year.  This growth will likely be supportive of risk assets over the next quarter, with international markets expecting out-performance relative to the United States as the dollar begins to weaken. While a recession in the United States continues to be a threat, one is not expected during the first three to six months of 2020 unless there is a significant unforeseen event.

Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by  Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.



4th Quarter 2019 Market Commentary

Note: This market review was published on October 16th, 2019 and may not be reflective of current market or investing issues.

The third quarter of 2019 was a wild ride for U.S. Markets.  The S&P 500 hit a new all-time high of 3,027.98 in July only to sell off more than 6.5% by early August. Many of the risks that were influencing markets in the second quarter are still relevant today.  There has been little progress made in the trade war between the United States and China, tensions in the Middle East have continued to escalate, and the latest deadline for Brexit is less than a month away.

During the third quarter, the Federal Reserve followed through on their dovish commentary by cutting their benchmark rate by 0.25% in July and September. The future path for the Fed is still in question however.  Chairman Powell continues to say that these rate cuts are not part of a cyclical change, rather a mid-cycle correction, meaning that he would prefer not to continue to cut rates in the future.  In addition to rate cuts, the Fed also had to intervene in over-night lending markets in order to provide liquidity as there have been multiple spikes in the overnight rate due to a lack of dollar liquidity.  If the dollar liquidity issue continues, and the Fed is unable to provide sufficient capital through their current repo operations, a new quantitative easing (QE) cycle might begin.

The trade war between the U.S. and China has seen little progress with increased tariffs from both sides.  Tensions have come down over the last few weeks as a potential deal has been tentatively reached.  The deal is said to be implemented in phases with the first phase being China purchasing more American agricultural products, primarily soy beans, and the United States agreeing to stop increasing tariffs.  No tariffs have been removed at this point; however, pending the first phase of the trade deal, some tariffs have been delayed from the third quarter to the end of the fourth quarter after the holiday shopping season.

Tensions in the Middle East continue to be a significant threat, especially to the oil market.  Oil had its largest one day move in history in September following an attack on the largest oil refinery in the world, located in Saudi Arabia. The United States has blamed Iran for the attacks, which has continued to degrade relations between the two nations.  While there has not yet been a response to the attack, it is unlikely that tensions will subside anytime soon.

Over the next few months it is likely that central banks around the world will continue stimulus both by cutting rates and by resuming, or increasing, QE. Earnings for U.S. companies are likely to disappoint when they report third quarter results, which could lead to a short-term consolidation in equity markets.  As central banks continue to provide stimulus, we will likely see equity markets pick up later in the fourth quarter or early in 2020, although a global recession continues to be a viable threat.

Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by  Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.


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