Newsletter — Q1 2019

Staying The Course


Pictured with me is my trainer, my coach, Mike Deibler. Mike and I along with thousands of other participants completed the Chino Hills Super Spartan Race on January 26th. 8.6 miles and 29 obstacles later, we crossed the finish line muddy and exhausted. 

As I came to the last obstacle right near the finish line, I heard a voice yell out “Come on Brandon, you got this”! It was Mike, cheering me on with a smile. With every fiber of my being hurting at that moment, his encouragement was all I needed to overcome the last and final obstacle, Spartan Multi-Rig. 

In 2016, I decided I wanted some sort of physical challenge and a friend of mine told me about Spartan Races. It was soon thereafter I was introduced to Mike’s gym in Carlsbad which is a certified Spartan gym. Mike and his wife have been doing Spartan Races since before they were popular.  I immediately appreciated and respected his experience and expertise on how to effectively train for Spartan Races, and, how to stay in shape for my three sons who are full of energy! So, here I am a few years later still training with Mike and doing Spartan Races. I’ve learned much from Mike and he continues to help guide me through challenges and obstacles I could not overcome without his help. 

The market declines in 2018 provided me an opportunity to coach my clients through a very difficult challenges and obstacles. As an investor myself, I can empathize with market participants. The market volatility in the last quarter of 2018 was horrible. Up and down, then, just down! The S&P 500 fell 19.8% from September to Christmas Eve. Media outlets hit every news feed with headlines like “Trade War with China”, “Federal Reserve will choke economy into recession”. Then comes the selling. The media does a wonderful job putting fear into the hearts and minds of people. It’s no wonder people panic when all you see and hear are negative headlines. Research has shown that today we are exposed to as many external stimuli in one day as someone living in the Middle Ages encountered during a lifetime. That’s horrible! It’s these types of market environments that keep me going and passionate about what I do. I enjoy teaching, educating and providing perspective so my clients can stay focused on the long-term outcomes they are trying to achieve. 

Research indicates it’s not only impossible to predict short-term market moves, but that retreating from stocks at the wrong time can significantly damage long-term returns. For example, the S & P 500 had an average annual return of 7.7% from 1997 to 2016. But an investor who missed just the best 40 days during that span would have suffered a 2.4% annual loss. (From Capital Group) Moral of the story? Those that get hurt on a rollercoaster are those that jump off.

Now, it is important to note that an investor has different phases of their investment life. Their asset allocation (distribution of assets according to goals) should reflect a goals-based strategy and assess one’s ability to handle risk and volatility. 

2019 should provide plenty of negative headlines for us all to chew on. But are things really that bad? U.S. job openings hit a record 7.1 million in October which exceeded the number of unemployed Americans. (Market Watch October 2018) Manufacturing data is strong and company earnings continue to grow. At some point of time, we will have another recession. At this juncture, I do not see any data pointing to one on the near-term horizon. 

It is my joy to help individuals, families and business owners achieve Financial Peace. Onward and Upward we go, regardless of daily fluctuations. Having the plan in place, driven by goals-based planning is what brings home financial peace, and, freedom.

Annual Market Review - 2018


Trade wars, midterm elections, and market volatility highlighted 2018 for investors. In an attempt to reduce the trade deficit, President Trump pushed to rewrite trade agreements with several long-time trade partners of the United States. Trump amended the trade agreement with South Korea, imposed tariffs on steel and aluminum, and renegotiated the North American Free Trade Agreement (now called the United States-Mexico-Canada Agreement). But the trade war with China has been the most compelling and impactful, not only to the countries directly involved, but to much of the global economy. Reciprocal tariffs were imposed by each economic giant throughout the year. There was a temporary truce achieved following the Group of 20 summit, but there was no definitive agreement reached.

Elections in November showed how politically divided the nation is. Democrats picked up 40 congressional seats to win control of the House of Representatives for the first time since 2011. On the other hand, Republicans maintained control of the Senate. The end result is a Congress that has become more divided, at least politically. Oh, and the federal government shut down in late December due to a budgetary stalemate between President Trump and Congress, principally over funding for a border wall.

For the year, the stock market reached new highs and gave it all back by the end of December. "Volatility" is the word that best describes the market in 2018. Despite the economy expanding at a rate not seen in many years, favorable corporate earnings reports, strong consumer spending, tepid inflation, and plenty of jobs to be had, stocks floundered. Trade wars continued, the Federal Reserve hiked interest rates, oil prices bottomed out, and long-term bond prices rose. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), which provides a measure of market risk and investors' sentiments, spiked in February, then was relatively stable through much of the summer. However, by the end of December, the VIX jumped again. Stocks were sold, bought, and sold again in rapid order, causing benchmark indexes to post noteworthy gains and losses on an almost daily basis. As a result, investors rode a roller coaster of stock prices throughout the year.

The year saw some positive highlights as well. The economy expanded at an annual rate exceeding 3.0% for the first time in several years. The unemployment rate hit the lowest mark since 1969. In November, 1.7 million persons were marginally attached to the labor force, an increase of 197,000 from a year earlier. The Federal Reserve, based on the strength of the economy and labor market, raised interest rates four times during the year. Consumer income rose and purchases increased, and inflation exceeded 2.0% midyear, only to fall back below that target by the end of 2018.

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Eye on the Year Ahead

The economy grew at a respectable rate in 2018. Will it continue along the same path in 2019? Fears of an economic slowdown lingered at the end of last year and may be realized in 2019. The housing market hasn't picked up the pace and is generally lagging behind other economic mainstreams. Also, with inflation inching ahead, economic stimulus may be easing, which could lead to tighter financial conditions moving ahead. Certainly if the global trade wars between the United States and China continue, not only will the impact be felt domestically, but a rift between the world's two largest economies is sure to affect global economies and markets as well. And, as 2018 closes and 2019 begins, the federal government remains shut down.

Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/ Market Data (oil spot price, WTI Cushing, OK); (spot gold/silver); Oanda/FX Street (currency exchange rates). News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indices listed are unmanaged and are not available for direct investment.

Positive Quote:
"The smallest deed is better than the greatest intention"
- John Burroughs

Fun Fact
I launched my own YouTube channel! There are a few educational videos uploaded already.
Be sure to check them out and subscribe to my channel by searching my name.

I look forward to continuing to guide clients through 2019 and beyond. If you have a friend or family member that you think would benefit from working with me, please don’t hesitate to make the introduction. Thank you for your trust and business. 

Cass Newsletter Pic.png

Brandon K. Cass, CWS®
Partner | Wealth Advisor
CA Insurance License #0E80823

Intrepid Wealth Management
5780 Fleet Street, Suite 170
Carlsbad, CA 92008