2019 First Quarter Newsletter

The Fed backing off 2019 rate hikes and the possibility of a reduction of the tariffs also helped propel the markets. If you read my December letter, I said that if the Fed did not increase rates in December, stocks would have tumbled. This year after the Fed announced no change, the talking heads said the markets will decline. They did for one day and then headed higher. So much for the “experts”.

The Fed decision also was responsible for the decrease in the 10 year Treasury from 2.7% to 2.4%. It resulted in a slight inversion with the 3 month note which again was called a reason for a future market correction, which might or might not happen. It depends on how long the inversion lasts. Short term; no real problem. Long term; maybe a problem. My impression is the bond market will self correct by the summer and the 10 year will rise.

The Mueller report is completed and will be available to the public this month. It appears that there was no collusion between Mr. Trump and Russia. The media and some Democrats will not be satisfied until they review the entire report, but that report was also partially responsible for a stock market increase. Most markets hate the unknown.

All of this is history now and some parts will carry forward, but the main question is what I think will happen through the end of this year.

Corporate earnings are estimated to reduce from the present numbers. That does not mean they will be negative. It means they MIGHT reduce and still be positive. I expect the earnings to be slightly lower and the stock markets will reflect that; slightly lower returns than last quarter and still positive.

Interest rates are a lot lower than last year and reflective of what the bond markets see in the future. Bonds are saying they expect lower rates and a slowing of the US economy.

Many foreign countries appear to be coming out of the doldrums and look set to grow. Europe looks slow and Asia looks very good. South America has some economic problems and may do OK as the year progresses. Canada and Mexico look solid. I’m not sure about Africa.

Please do not misinterpret what I think will happen for the remainder of 2019. The stock markets will NOT continue with double digit returns. I expect and hope that the stock markets will continue to yield positive returns, but much lower than the first quarter. The year to date quarterly returns are good enough for a full year. That cannot continue for the remainder of 2019. I expect a lot of volatility as the stock market digests the economic news. Please remember, the stock markets are forward looking.

The reason I am usually so positive for the future is a stock is a piece of a corporation. I believe the US and foreign countries will grow making each share worth more. Yes, there will be sell offs and the next one can be anywhere at any time. However, I believe that the trend line out into the future is upward sloping and five years from now I hope we will all be doing better.

I like to diversify all portfolios working with US stocks and foreign stocks. Depending on your risk tolerance, some bonds may be used to modify the risk and bring about an additional measure of stability. Corporate earnings look good for the rest of 2019 and I like the US large cap, mid cap and small cap funds. I let the professionals that invest overseas decide how to construct their foreign portfolios. Interest rates should rise and result in some minor losses in the bond markets.

Emily and I completed a 40 day trip to Southeast Asia. We saw some great growth and some countries that are stuck in the 1800’s. Positive was Singapore, Thailand, Malaysia, Viet Nam and Hong Kong. Indonesia has growing pains. The negatives were Myanmar (Burma) and Cambodia. Both of them leave a lot to be desired.

Please let me know if there are changes in your life so we can change your IRA and other beneficiaries if the changes merit them. Also, if you are concerned with the stock market volatility, call me. We can discuss changing your portfolio and trying to reduce some of that volatility.

Thank you for your confidence. I will continue to keep you informed as best as I can and make recommendations based on what I think I see. Please, do not hesitate to contact us. We are here to help you.

Thank you for your business and referrals.


James F. Mangam, Jr., CFP, CLU

The Mangam Agency

With over 50 years of combined experience in the fields of health insurance, life insurance, and investments, our team of dedicated representatives will help ensure you are on the right path.

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