In 2018 everything seemed to decline while 2019 was a year in which most investments gained significantly.

Short-term market moves are like wiper blades moving up and down, up and down across the windshield in front of you. Every day, stocks are up or down, bonds are up or down, then stocks are up again, and real estate is down, and so it goes.  It is easy to get caught up in this back and forth without ever really thinking about what purpose it really serves. The past 24 months are prime examples of why it is important not get caught up in the short-term and instead focus down the road.

Windshield wipers keep you on the road, moving safely forward with a clear line of sight.  Investing with a long-term strategy also keeps you moving forward, gains you clarity, and can help you safely move toward your financial destination.  As hard as it would be to drive without wiper blades, it can seem just as hard, if not impossible to invest without a strategy, a plan, and a process to implement it.

It’s times like these that drive home how and why we emphasize and stress having a consistent and intentional strategy. 

  • Because market timing is almost impossible to do;

  • Because not all markets work in unison and investing in only 1 asset class or one country means missing out on potential benefits across the global investment landscape;

  • Because having a strategy will help reduce the emotional highs and lows when investing;

  • Because concepts like diversification can help protect against downside risks and volatility;

  • Because rebalancing may protect against valuation extremes or unknown risks;

  • Because it helps keep you focused, calm and disciplined.

In a few of our prior quarterly perspectives, we wrote the following:

“these [year-end selling] issues …should resolve themselves as we progress into 2019, and we believe this will lead to some improvement in liquidity conditions in the new year.

“It is not unusual to see market corrections during periods of monetary tightening.”

“This longer-term resurgence in stock prices was not always smooth yet was grounded in substantial positive changes”. ..[ to GDP and employment].

“Short-term market volatility and uncertainty can create large opportunities.…If you have an investment strategy and financial plan in place, you have a significantly better chance to end up where you intended to go.”

Reading these again, I don’t see anything to argue against and think that they still apply today heading into 2020. Market downturns can be frightening and when markets are doing well, investors worry about when “it will end.”

There is a memorable sequence in The Lord of the Rings: The Two Towers where Sam says to Frodo that the road upon which they are traveling looks strangely familiar, and Frodo responds, “that’s because we’ve been here before”.

Investors may have felt a little like Frodo and Sam during 2019: unprepared for what lay on the road ahead and then confused by where they ended up. While many investments performed well in 2019, the road to getting there was certainly not as expected.

Financial markets skillfully traversed a wall of worry throughout the year –fears of an escalating trade war with China, mixed interest rate signals, slowing global economic and corporate earnings growth.

This past year is just another example of why we continually tell our clients to stay invested and never try to time the market. We would also argue that the benefits of diversification are alive and well and should not be forgotten in the new decade we are about to enter.


What Happened During 2019?

Data Ending 12/31/2019 (not annualized if less than 1 year)

Equities Indices Q4 2019 1 year 3 years 5 years 10 years
MSCI ACWI (All Country World) 9.1% 27.3%  13.1% 9.0% 9.4%
S&P 500 (U.S. Large Cap) 9.1% 31.5% 15.3% 11.7% 13.6%
Russell 2000 (U.S. Small Cap) 9.9% 25.5% 8.6% 8.2% 11.8%
MSCI EAFE (International Developed) 8.2% 22.7% 10.1% 6.2% 6.0%
MSCI EM Emerging Markets (International Emerging) 11.9% 18.9% 12.0% 6.0% 4.0%
Fixed Income Indices
FTSE World Government Bond Hedged (Global Bonds) -1.4% 7.6% 4.1% 3.5% 3.9%
Barclays U.S. Aggregate (U.S. Investment Grade Bonds) 0.2% 8.7% 4.0% 3.1% 3.8%
Barclays Municipal Bond 5Y (4 – 6) (Municipal Bonds) 1.0% 5.5% 3.4% 2.4% 2.9%
Barclays U.S. Corporate High Yield (U.S. High Yield) 2.6% 14.3% 6.4% 6.1% 7.6%
Other Indices
S&P Developed REIT (Global Real Estate) 1.0% 24.7% 9.0% 7.0% 10.7%
HFRI FOF: Conservative Index (Diversifiers) 0.6% 5.3% 2.8% 2.1% 2.7%

Source: Zephyr Analytics & Morningstar

Globally, stocks moved solidly higher in 2019 and there was strong breadth across both size and geography. The S&P 500, which was up 31% in 2019, put forth its best annual performance since 2013.[1]  Meanwhile, small cap stocks gained 25.5%, real estate grew by 24.7% and international stocks gained 22.7% for developed markets and nearly 19% for emerging markets.

Meanwhile, fixed income also gained as interest rates declined and credit fears dissipated with the US Aggregate bond index gaining 8.7%.  High yield bonds were up more than 14% as the outlook for corporate earnings improved.

While there doesn’t always need to be a perfectly compelling rationale for stocks to behave the way they did in 2019, several factors had an impact:

  • Interest rates: The recent cuts to the Federal Funds interest rate by the Federal Reserve along with increases in long-term rates eliminated the inverted yield curve and the Fed has signaled a stable interest rate policy for the foreseeable future.

  • Global trade: The worst fears about the U.S.-China trade policy and their potentially most negative implications on the global economy seem averted, at least for now. The United States agreed to suspend indefinitely the tariffs that were to go into effect on Dec. 15 of 2019, and to reduce or maintain rates on existing tariffs (rather than to increase them).

  • Investor confidence: The prior two data points have been among those that have been a green light for many equity investors who may believe the economy is more stable heading into 2020.

What Does This Mean for Your Investment Portfolio? What Should You Do? Stay on the Road!

It is important to stay focused on your objectives and not get lost like Frodo and Sam due to the whims of the stock market. Clearly it is hard to predict short-term moves in financial markets. We obviously cannot predict what asset classes will be the best performers in the next month, quarter, year or the next decade.

But we are students of history, and we tend to believe that the benefits of diversifying are far better than not. We therefore continue to maintain a buy-and-hold strategy that contains a mix of many asset classes: U.S. and international equities, large cap and small, growth and value, fixed income, real estate and others.  We firmly believe this strategy should ultimately hold investors in good stead over this new and exciting decade.

Regardless of the direction of market volatility, we at Modera Wealth Management have tried to be consistent in our message to clients over time. A year ago, yes, right after the stock market got clobbered, we wrote:

“We have experienced many, many periods of turbulence and volatility. It will happen again. But when it comes to making investment decisions….you can easily get lost without a plan, particularly if you get caught up in short-term thinking. You should always know where you are going when it comes to your investments.” – Modera Perspectives – Fourth Quarter 2018

We think this message still holds true today and will be applicable for years to come.


Modera Wealth Management, LLC (“Modera”) is an SEC registered investment adviser with places of business in Massachusetts, New Jersey, Georgia, North Carolina and Florida. SEC registration does not imply any level of skill or training. Modera may only transact business in those states in which it is registered or qualifies for an exemption or exclusion from registration requirements.

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This quarterly commentary is limited to the dissemination of general information pertaining to our investment advisory services and financial planning services and general economic and market conditions that is not suitable for everyone. The information contained herein should not be construed as personalized investment, financial planning, legal, tax or accounting advice. For legal, tax and accounting related matters, we recommend that you seek the advice of a qualified attorney or accountant.

The returns shown in table 1 are annualized returns, except for periods less than one year, for selected asset classes as represented by benchmark indices. Investors cannot invest directly in an index. Unmanaged indices do not reflect management fees or transaction costs associated with some investments. Past performance is no guarantee of future results, and there is no guarantee that the views and opinions expressed herein will come to pass. This document contains forward-looking statements that indicate future possibilities. Due to known and unknown risks, other uncertainties and factors, actual results may differ materially from the expectations portrayed in such forward-looking statements. Readers are cautioned not to place undue reliance on forward looking statements, which speak only as of the date of this document.

Investing in the equity and other markets involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered a solicitation to buy or sell any security or to engage in a particular investment or financial planning strategy. Individual client asset allocations and investment strategies differ based on varying degrees of diversification and other factors. Diversification does not guarantee a profit or guarantee against a loss. Not all asset classes or funds discussed herein are held in all Modera client accounts, and the asset classes and indices discussed in this quarterly letter were selected for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell any securities. The performance of Modera client accounts may differ depending upon actual composition.

S&P data © 2020 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. FTSE Russell is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. MSCI data © MSCI 2020, all rights reserved. Bloomberg Barclays data provided by Bloomberg.