There is a very old, well known, Wall Street saying that goes something like this.
“The stock market will always climb a Wall of Worry!”
Oddly there are two themes that are conveyed in this saying.
- The obvious, a wall of worry creates enough doubt for capital markets to operate efficiently and rise
- The less obvious, when everything is clear and the sun is shining, sometimes it’s near the end of the expansionary times and happy capital markets.
As fast as this year went, our memories are still very clear on what capital markets look like just twelve months ago.
In chicken little like fashion the sky was falling, Capital Markets, and participants were throwing a giant hissy fit, and the federal reserve was cranking up interest rates to participants dismay.
With 2020 hindsight, a nice wall of worry was created.
With earnings being the ultimate driver of capital markets, a drop in earnings, a recession, or global slow down, would lead to the decline in capital markets but for now we certainly don’t have to worry about item two above in that old wall street saying.
Speaking of recessions, be sure to review the capital market article in our Q1 2020 Newsletter, concerning the lowering of rates while the inverted yield curve – a much talked about by us event, and somewhat disdained. As mentioned in the newsletter we ran across this information mid quarter, and certainly must acknowledge the history brought up by the speaker and his chart, which may avert a recession, at least for now
Also in the newsletter two, two -part personal financial planning articles, one dealing with inheritance and another dealing with automobiles that you may find interesting as these topics were repeated in our office throughout the final quarter of the year and made for a great subject.
Thank you for your time, thanks for reading our blog posts, newsletter and YouTube videos, we enjoyed bringing you all original, somewhat rough at times information as we see it through our eyes!
In Closing
Your Fourth Quarter summary is enclosed on the front page of this report we have included our most recent investment allocation from your Investment Policy Statement. This is also the time we attach our Private Policy Statement for the year along with our opportunity to offer our latest ADV filings; Requests for review will be accepted via phone, mail or email, and mailed immediately upon request.
Sincerely,
John A. Kvale CFA, CFP
Enclosure (2019 Report, Private Policy)
J.K. Financial, Inc.
PRIVACY POLICY NOTICE
Our Promise to You
As a client of J.K. Financial, Inc., you share both personal and financial information with us. Your privacy is important to us, and we are dedicated to safeguarding your personal and financial information.
Information Provided by Clients
In the normal course of doing business, we typically obtain the following non-public personal information about our clients:
- Personal information regarding our clients’ identity such as name, address and social security number;
- Information regarding securities transactions effected by us; and
- Client financial information such as net-worth, assets, income, bank account information and account balances.
How We Manage and Protect Your Personal Information
We do not sell information about current or former clients to third parties, nor is it our practice to disclose such information to third parties unless requested to do so by a client or client representative or, if necessary, in order to process a transaction, service an account or as permitted by law
In order to protect your personal information, we maintain physical, electronic and procedural safeguards to protect your personal information. Our Privacy Policy restricts the use of client information and requires that it be held in strict confidence.
Client Notifications
We are required by law to annually provide a notice describing our privacy policy. In addition, we will inform you promptly if there are changes to our policy.
Please do not hesitate to contact us with questions about this notice.
A True Yogi Berra saying may be fitting now – “It’s like déjà vu all over again!”
Tariffs and Trade War Talks Continue
While the tariff banter seems relentless and every day changing, leading to Capital Market bipolar movements, one day irrational exuberance, and the next day irrationally depressed, as mentioned in our Q4 Newsletter, tariff talk has been going on for decades. With today’s constant bombardment of immediate news stories and short clips it seems, present party included, to be constant and all encompassing. The reality is this likely will work itself out, just as seen in the graph in the newsletter. Our bet is once the tariff talk turns into tariff agreements, we will see market relief and higher overall interest rates. For now, there’s no doubt that the tariff talk is slowing the global economy and there is no envy for public company managers trying to navigate the possible changes that occur on a day by day basis, making it very tough to stock inventory and make purchases.
Treasury Rates- Interest rate cycle
Given the afore mentioned Tariff Talk, FOMC (Federal Open Market Committee) led by chief Jerome Powell and a company have embarked on a lowering of rates, twice to be exact, but only two .25 basis points each, in an attempt to help ease interest rate burdens and spur the economy. While not huge fans of the lowering of rates at this time due to gun powder needs at a future, when the inevitable recession occurs, at this time it appears we are on an interest rate decrease path, a complete 180° turn from just one year ago, when reserve officials were raising. If there is an agreement in Tariff talk, lowering of rates would likely stop, and we might even hear talks of raising, making for an interesting rate cycle. Time will tell.
Taxes or the savings of taxes paid
As we head into the final quarter of the year it’s time to make sure we’ve done all we can do for this years’ , especially items that have no look back features. As also mentioned in our Q4 newsletter, be sure to max those 401(k)s, contribute or distribute from 529‘s, complete Required Minimum Distributions (RMD’s) and make sure those charitable giving are complete this year, as all of these items have a hard stop year-end deadline.
Have a great day and start to fall!
Sincerely,
John A. Kvale CFA, CFP
Enclosure 2019 Report
Q 1 2020 Quarterly Review Cover Letter –
First and foremost I want to wish everyone safety and healthiness as we go through these times. We will get through this and will all be stronger and more knowledgeable for the experience.
As mentioned in our Q 2 2020 Newsletter, the speed of the lower Equity markets left many investors struggling for cash to recklessly sell their safest assets, bonds. This put unique pressure on Bonds and Bond Funds, temporarily lowering their value in stead of increasing their value, which is what should happen as interest rates lower. The good news with this situation, with history as our guide, this situation corrects over shorter time frames and also allows for our re-investment at artificially lower rates, a win, win in our opinion!
An Unknown becomes a Known?
As of this writing the contagion continues, uniquely, do to the self-imposed economic slowdown from the Virus, at a given point in time, hopefully much sooner than many may think, a great unknown will become a known.
Unlike the last two major economic slowdowns there was uncertainty in far reaching aspects of other assets and other parts of the world and economies.
At some point in time we will conquer the Virus and the unknown will become the known!
Capital Market Participants will anticipate this and begin pricing in the not only conclusion of this economic slow down but the positive affects of the very large stimulus package that has been put into place.
As mentioned in again and more prominently, in our Q 2 2020 Newsletter which you hopefully have already received, there have been an abundance of stimulus programs that at this point have likely not even begun to filter into our economy in any meaningful way.
Once the full effects of the stimulus seep through our country and the unknown becomes the known we truly believe that our economy and therefore capital markets will be in a much better place in a much shorter time than in prior slowdowns.
Stay safe, thanks for all of the positive comments – we will get through this together.
Sincerely,
John A. Kvale CFA, CFP
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Posted in Clients/Clients Only, Investing/Financial Planning, Market Comments, Performance Report Cover Letter
Tagged Cover Letter, Q 2 2020 Newsletter