(A Fiery Start)
Each year Wall Street watches the first five trading days of the market to get a pulse of what’s in store. Historically this sets the course for the year and what to expect. Last week the market ended up despite falling back after the news broke regarding the drone attack on Iran’s “General” Qasem Soleimani. Volatility jumped with this news.
The General was widely known in the Middle East and loved as the marches and funeral procession have proven. Labeled a highly dangerous terrorist he took credit for over 600 American deaths. What isn’t known is how this situation will proceed. Fear of it escalating into a military conflict is now listed as a higher possibility of headwind in 2020. We are reiterating to overweight the defense sector this year. Backed with the substantial increase in funding by the Federal government’s budget these companies have contractual guarantees of revenue. Add in any conflict and this sector should be well positioned.
It will join other headwinds in 2020 which include a slew of leading economic indicators that have been contracting and or slowing. In January economic reports to watch include manufacturing, unemployment and labor reports, and gross domestic products. This joins a broader view of external influences on the global economy which is showning signs of continued slow growth. Europe in particular is expecting to turn the corner by 2021.
Many analysts are calling for foreign stocks to outperform domestic equities. A well-balanced portfolio always makes sense if it matches your risk objectives. Keep in mind there are differences between developed countries and emerging ones. Developed countries have an established modern economy and less risk of government toppling or other risks that may impact trade. Emerging countries are opening their system to new economies and modern goods to their citizens. All of these populations are potential customers to new business concepts versus a population that already has competitors in the market place that offers those goods or services. They also have risk of government, currency and or fraud.
January is always a great month to rebalance or revisit your portfolio goals and objectives. Take time this month to check your allocations and what areas of the market may outperform and deserve to be over weighted. The same goes for areas you think will underperform the market. Underweight these areas in your portfolio. Just to revisit what weighting means. Weighting a referenced used to compare a portfolio’s positions compared to the indices it is positioned to perform like. The S&P 500 is made up of so many companies in the medical field, technology or transportation. So, for example the technology companies could make up 20% of the S&P500 index. That would be its weighting. If you have a 25% weighting it would be over weighted and if it was 15% in your portfolio you would be underweighted. Revisit how your positioned. Get focused in 2020.
If you have questions on a particular company or investment and would like our feedback, contact us at my email below. Our team will research and respond to you with our recommendation and opinion.
Andrew F. Kotyuk, CIMA* is CEO and Principal of Alpha Wealth Management LLC. For questions or investment topics please email me [email protected]
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