You wouldn’t know it from reading headline news, but the S&P 500 today closed up over half a percent compared to a week ago (2972 on Friday March 6 versus 2954.22 on Friday February 28). The takeaway: Our collective mood doesn’t always reflect reality. Meanwhile a record-breaking global bond rally accelerated on Friday, with growing fears over the economic impact of coronavirus sending investors scrambling for the safety of government debt at the fastest pace since the financial crisis of 2008.

You are no doubt painfully aware of the market drop last week. A chart of the past five days looks like stepping off a steep cliff. By the time markets closed on Friday (28-February), the Dow had lost 12% for the week and the S&P had lost 11%, their worst week since October 2008, during the global financial crisis. Yields on the ten-year Treasury Bond plummeted to an all-time low. Oil prices dropped to their lowest level since December 2018.  And gold, usually a haven amid nasty stock market sell-offs had its biggest fall in years. If there was any good news, it was bittersweet: losses were smaller on Friday than they had been all week.

In stark contrast to the beginning of 2019, global stocks closed out January with a 1.1% loss versus a gain of 7.9% in the same period last year. US stocks recorded their first month-over-month drop in recent months as investors were left with uncertainties surrounding the outcome of the Trump impeachment proceedings, tensions with Iran, and the Coronavirus (COVID 19) outbreak. The US Federal Open Market Committee met and left its interest rates and policy unchanged. The earnings outlook remained favorable. Gold rallied almost 4% to close at $1,593. The Bloomberg Commodity Index dropped over 7% with crude oil prices plunging over 15%. Bond prices climbed as the Ten-year US Treasury closed sharply lower at 1.51%, down from last month’s 1.92%

There’s always something to rattle the markets. Wise investors understand that, and don’t let the news derail their investment strategy. But when bond yields sink, even disciplined investors may be tempted to jump to dividend-paying stocks as an alternative for generating cash. This month we look at the pros and cons of that approach. (Hint: there is no free lunch.) First, a look at January’s market performance.

Stocks and bonds in the US, and in many other developed markets and emerging markets, generated strong returns in 2019. Global equities were up more than 25%, and fixed income added more than 8%. For some, this performance is tinged with worry. After all, the US bull market is a decade old, and current headlines hint at all kinds of potential catastrophes ahead. Globalization backlash, Brexit uncertainty, bitterly divisive politics, rising inequality and climate change, to name a few. But don’t let worry derail your investment strategy. It’s impossible to predict the future of the markets with certainty. Who can say what this year will bring, much less the next decade? The only certainty is that the future will be filled with surprises. This month we’ll consider the lessons of the past decade, and how they might guide us now. First, a review of fourth quarter results

This month our focus is on bonds, specifically the question of whether it’s smarter to invest in individual bonds or in bond mutual funds. Many financial journalists, advisors, and investors question the wisdom of investing in bond mutual funds, especially when interest rates are expected to rise. They gain emotional security in knowing investors can buy and hold an individual bond to maturity and get their money back. What some fail to recognize is that bond mutual funds are merely diversified portfolios of individual bonds, and both are equally exposed to the same market pricing mechanism. The day interest rates go up, individual bonds will fall in value just like bond mutual funds. Truth is, interest rate risk can be immunized with either individual bonds or bond mutual funds as long as the duration of the bond portfolio is appropriately matched to the desired investment horizon. The fact that an investor is able to get principal back at a specific maturity date adds no economic value compared to a bond mutual fund that does not have a specific maturity date. To unpack this story, we cite directly from research, noting sources along the way. This article is long, so we’ve tried to highlight key conclusions. Before we jump in, a quick look at October market performance.

The markets delivered handsome returns in 2019, but not without periods of significant volatility. Of course, the year isn't over yet. With the prospect of impeachment looming, the markets may experience more twists and turns before the final bell of 2019. For now, let's take a look back at November performance. Then please read on for a year-end message of gratitude from all of us here at Cardiff Park.

The S&P 500 delivered a modest increase in the third quarter, helping stocks hold on to their biggest year-to-date gains in more than two decades. The simultaneous rise in safe assets like Treasuries reflects the fact that the most prominent economic narratives today are not optimistic. If you add the bleak surveys of business confidence worldwide, you may decide it’s time to batten down the hatches in preparation for a downturn. But you can't predict the future, and neither can anyone else. Meanwhile, in the battle to capture customers, Charles Schwab shook the brokerage industry last week when it said it will cut commissions to zero. Schwab’s move has since been matched by TD Ameritrade, Fidelity and others. We’ll look at benefits and potential concerns of this latest step after a review of Q3 market results.

It was a volatile month for stocks. Fears about escalating US-China trade tensions sent the Broad US Stock Market Index down 2.50% or more on at least three occasions in August, the most in nearly eight years. Gold prices surged as investors sought a refuge from the selling. The yield on the two-year Treasury Note surpassed that of the ten-year for the first time since 2007. The S&P 500 Index still returned 18.34% YTD, and within a couple percent of July’s record close. 

When will Emerging Markets come back to life? Ten years is a long time for buy-and-hold investors to be patient, especially when comparing the subpar returns of Emerging Markets to the stratospheric gains of the S&P 500 Index over the same decade. The data tell a nuanced global story, punctuated by politics, protectionism, nationalism, trade wars, climate change, and unexpected winners and losers. In our view, the story is far from over. We’ll share our perspective and advice after a look at the July markets.

You may have heard about “opportunity zones,” real estate hot spots that are attracting developers, fund managers and investors. Got $1,000,000 in capital gains? You could roll those capital gains into a “Qualified Opportunity Fund (QOF)” to defer or reduce current tax obligations and eliminate future capital gains! One catch: your money has to be tied up for ten years to reap the full benefits. Also, there’s no guarantee that your $1,000,000 investment will make a dime. We’ll look at the benefits and potential perils of this latest real estate investment craze after a review of Q2 market results.