Slow Out of the Gate … But Making Up Ground!

 In Strategy Updates

Hindsight is 20/20 and, as we reflect upon 2019, our team was too conservative at the beginning of the year – when economic data was deteriorating and stock market indexes were on the heels of a 20% decline and looking like it might turn into something much worse.

However, since the end of January – when we became more aggressive – our equities have returned on average 15.51% after fees versus 11.69% for the MSCI World Stock Index (the benchmark for global investors) and 13.29% for the all domestic S&P 500 index. We are in the right stocks and making up ground from our earlier, more conservative position. Keep in mind, these numbers are for stock returns and do not include your fixed income assets.

In retrospect, we wish we had been more aggressive with your assets earlier in the year, but our “better to be safer than sorry” philosophy worked against us in the short term. As fiduciaries of your wealth, we believe that this view of managing potential downside risk is critical to your long term wealth accumulation. It is the vicious bear markets, like 2008 or 2001, that are detrimental to your longer term investment success.

Over our 26 year history, short periods of underperformance – like the first quarter this year – are usually attributed to managing potential downside risk. However, over time, these periods have been followed by periods of outperformance – as the last few quarters have demonstrated. Most importantly, performance for 2019 has exceeded financial planning and spending policy required rates of return – the measure that really counts to ensure your assets last your lifetime and possibly that of future generations.

As you know our team’s compensation is based on your performance, so together we have a mutual goal to increase your wealth while concurrently managing risk.

Global Market Indexes Trade Sideways For Two Years…

That is until a few weeks ago. After almost 2 years of markets trading sideways (see chart below), we see a bright future for 2020 and your stocks. We are in the right companies, as recent performance suggests, and believe that 2020 will be a constructive year for the global economy and markets.

MSCI Global Stock Index 2018 & 2019

Source: Bloomberg

I’m very passionate about the markets and performance, so feel free to contact me directly if you have questions about your portfolio – my direct line is 415-426-2582. I would look forward to chatting with you about our strategy.


James E. Demmert
Founder-Managing Partner