Extraordinarily Ordinary – February 2020 Commentary

“If you are distressed by anything external, the pain is not due to the thing itself, but to your estimate of it; and this you have the power to revoke at the moment.”

Marcus Aurelius

At times, the market responds to the news. At other times, the market is THE news. Investors had been hearing about the Covid 19 virus since mid-January but the market seemed quite content to shrug it off as being of no great consequence. And so it wasn’t until it was. After enjoying a 30% + ride in 2019, the good times continued to roll into 2020 with the market up another 4.7% for the year as of February 19th. The following day the market dropped out from under the investor and what followed was an 11.8% decline in just two weeks and 7.7% for the year. Investors with a 60% exposure to the stock market will see 5% declines in their February statements and 6% for the year drawing portfolio values back to their end of September 2019 values.

So, welcome to the sixth correction of this eleven-year-old bull market. In 2011, it was the European Debt Crisis, in 2013, the Fed Taper Tantrum as the US Federal Reserve sought to unwind some of the effects of the quantitative easing it had employed to combat the effects of the Global Financial Crisis. In 2015, it was the Chinese devaluation of the Yuan. In 2016, it was Brexit. In the fourth quarter of 2018: tariff wars.

Global Market Commentary - Financial Advice - Wealth Management - Heritage Wealth Management

Those searching for real information beyond the headlines were left scratching their heads wondering what they were missing. In the past three weeks China, ground zero of the disease, reported 13,002 new cases in the week of February 17th, 6,398 the week of February 24th and 415 for the most recent week. Even the mildness of the symptoms was cited by some as bad news as many may have had the illness but didn’t know it. Fatality rates are at 2%, maybe less, and those harboring the virus infect only an average of two to four others within a distance of one hundred feet or less. This has it looking more like the flu which so far this year has affected fifteen million Americans resulting in 8,200 deaths versus the two reported to date from the Covid 19 virus.

Those professing to practice the offering of investment rather than medical advice nonetheless are cautioning that the economic effects of this virus will materially impact global growth rates and corporate earnings thus justifying the recent market decline. Strangely, some who claim to be forward-thinking are left denying that China is going back to work and that automotive traffic levels in that country’s major cities are rapidly approaching their pre-crisis levels. Apple’s CEO Tim Cook has claimed to be unable to perceive any notable disruption in that companies supply chain.

I’m a financial advisor, not a psychotherapist. I do not really understand why there is such a great and seemingly growing appetite for doom among the populations of the developed world. We live in times of unparalleled peace and prosperity. Never in all of human history have so many lived so well. I do understand that the economic capacity of the world is driven by the demand for the goods and services of this world’s people and that economic demand is like a string gathered together in one’s hand. Its length doesn’t change so the less revealed in the short term the more is to be revealed later. One year from now this world will look very much like it would have had the Covid 19 virus never made its appearance. This is the very best information for investors to remember.

Mark H. Tekamp

March 4, 2020

Rhymes in Time – January 2020 Commentary

“History is a gallery of pictures in which there are few originals and many copies.”

Alexis de Tocqueville

First, there was the East Asian Financial Crisis of 1997. In 1998 there was the Russian debt default and the collapse of Long Term Capital Management. In 1999 there were fears of the “Y2K bug” and the possible collapse of the global technological infrastructure’s ability to process payments for years starting with the number 2. The Federal Reserve responded by lowering interest rates and injecting liquidity into the financial system. The United States experienced a corporate recession but the economy remained robust with strong consumer spending. The financial markets, delighting in the intoxicating elixir of a dovish fed and continued economic growth responded by bidding up the NASDAQ index a cool 100% in 1999.

The past several years have offered up Brexit, “tariff wars” between the US and China and global economic growth rates that post the Global Financial Crisis of 2007-2009 are only 60% of those of the 1990s. Between the 4th quarter of 2017 and the 2nd quarter of 2019, the US economy grew 2.9% or more five out of seven quarters. In the face of seemingly increasingly robust rates of economic growth, the Federal Reserve increased interest rates three times in 2017 and four times in 2018. Looming over the horizon in early 2018 however, was that the Federal Reserve was raising interest rates in the face of falling global economic growth rates. The S&P 500 protested by declining by nearly 20% in the 4th quarter of 2018. In 2019 the Federal Reserve reduced interest rates three times and the S&P 500 registered its approval of a Fed that had morphed from Hawk to Dove by rising 28.9%.

Global Market Commentary - Financial Advice - Wealth Management - Heritage Wealth Management

In the face of such strong performance numbers for US equities in 2019 investors are left asking themselves what the financial markets could possibly deliver by way of an encore. Do we continue to dance with the partner with which we enjoyed dancing so much with in the past year, change partners or prepare to sit this one out?

Let us hazard a few predictions about the year ahead. Global growth rates accelerate with the growth rates between the US and foreign economies narrowing. The ten-year bull market in the US dollar ends. Global inflation rates increase modestly resulting in an increase in intermediate to longer-term interest rates while central banks hold short term rates at current levels leading to a steepening of the yield curve.

Post Global Financial Crisis equity markets outside of the United States have returned 124% or one-third the 378% return of US equity markets. Actually foreign markets have returned 45% more for local investors but the increase in the value of the US dollar has reduced the return of foreign equities for US investors. Currency markets tend to trade in eight to ten-year cycles with the US dollar advancing 54% from 1993 to 2002 and declining 41% from 2002 to 2008.

In addition to the currency effect, the returns of foreign developed markets are significantly impacted by the notable differences in the composition of their market sectors. Technology is 34% of the US market but only 12% of foreign developed markets. Other significant variances are industrials (7% vs 12%) commodities (7% vs 12%) and financials (13% vs 19%).

There is value in the equity market but you may want to be certain your passport is up to date. Value, married to a notable shift in the global economy and the end of the bull market in the US dollar, might offer investors profits comparable to those of last year but not in the same places.


Mark H. Tekamp

January 29, 2020

October 2019 Market Commentary

“There are three kinds of lies: lies, damned lies, and statistics.”

Mark Twain “Chapters from My Autobiography” (1907)


The US stock market as measured by the S&P 500 is up year to date since the first of the year by 21.2%. Good news. The stock market is up year over year by 4.00%. Not such good news. The stock market in the past six months is up by 4.00%. Boring news. Lest we forget, the stock market declined by 17 ½% in the three months prior to Christmas Eve 2018 so most of the 2019 return reflects a recovery from the prior late 2018 market decline.

Heading into October bears had a surfeit of reasons to be, well, bearish. Prospects for the settlement of the trade dispute between the US and China had dimmed. Corporate earnings were expected to reflect the slowing of US and global economic growth rates, the ISM Manufacturing report had dropped to its lowest level since the recovery from the Global Financial Crisis and then there was the matter of the inverted yield curve with its reportedly uncanny ability to predict the onset of economic recessions.

Equity Market Commentary - 2019 Recession - Heritage Wealth Management

Interestingly, despite the (or perhaps more accurately because of) this bearish backdrop, the S&P made a new high on the 28th and was positive 3.4% for the month. Perhaps more interestingly still the Consumer Confidence Survey revealed that slightly more US consumers, 32.2%, expected the stock market to be lower in twelve months than expected it to be higher, 31.7%, a phenomenon that has occurred only six times in the past thirty years.

Something else may be occurring in the financial markets that may be offering bulls a firm foundation upon which to rest their case. Investors in the US have allowed the return of US equities, in particular the large-cap tech names, to obscure the reality that post Global Financial Crisis global equity market investors have found opportunities for significant profits to be less than an equal opportunity experience with ten-year annual rates of return in foreign developed markets averaging 5.4% and that of emerging markets 3.1%. Since August 23rd the S&P has risen 6.5% but foreign developed markets are up 8.8% and emerging markets 9%. This isn’t sufficient information to confirm that a reversal of fortune awaits domestic and foreign equity markets but it’s worth keeping an eye on.

Equity market bears base their pessimism on the economy. The US economy hasn’t been in recession for ten years so we must be due for one. The Federal Reserve will continue to lower interest rates and interest rates in the bond market will remain low and possibly even go negative. Inflation is likely to be a no show for years to come but its opposite, deflation, is something we need to take care to avoid. This is consensus opinion but a better wager to make may be a contrary one.

Recessions occur to correct excesses in the marketplace be they financial or economic. Where do these excesses currently exist? What if central banks, both US and foreign, after ceaselessly shoveling additional forms of stimulus to light the fires of economic activity, succeed beyond levels of their current reckoning and the global economy is about to enter into a multi-year period of accelerating economic growth rates? Debt servicing costs for US consumers are at their lowest levels in forty-five years. US unemployment levels in the US are plumbing historic lows and wage rates, especially for those compensated at lower levels, are increasing at an accelerating rate as are a variety of measures of consumer spending that represent 70% of the US economy.

All things being equal I’d rather be an optimist than a pessimist but better still I’d like to wager on increasingly good news as a guidepost towards increasing investment returns in the financial markets. How about you?


Mark H. Tekamp

November 6, 2019

Are you a professional? 

Are you a professional? 

What does it mean to be a professional? The textbook definition is: a person who does a job that needs special training and a high level of education. But it’s more than that, isn’t it? Being a professional encompasses many things – from skillset to personality to aptitude. Here are a few common characteristics of a true professional: 

  • Do you learn every aspect of the job or do you skip the learning process whenever possible?
  • Do you carefully discover what is needed and wanted or do you assume what others need and want? 
  • Do you look, speak and dress like a professional or are you sloppy in appearance and speech? 
  • Are you focused and clear-headed or confused and distracted? 
  • Do you catch mistakes and fix them, or do you ignore and hide them? 
  • Do you remain level-headed and optimistic or do you get upset and assume the worst? 
  • Do you use higher emotional tones: enthusiasm, cheerfulness, interest, contentment; or lower tones: anger, hostility, resentment, fear? 
  • Do you persist until the objective is achieved or do you give up at the first opportunity? 
  • Do you produce more than expected or just enough to get by? 
  • Do you strive to give high-quality service or do you give medium to low? 

These are the questions that separate the professionals from the amateurs. The first step to making yourself a professional is to decide you ARE a professional! Then ACT like one!

At Heritage Wealth, we present a talented group of leaders, advisors, and staff to serve clients and continually improve operations. Our firm has the experience you can count on. Our advisors are professionals governed by the Fiduciary Rule. We use our knowledge and wisdom to make sound investments with your best interests at heart. If you’re ready to join with and invest with a firm whose focus is community and trust – please contact Heritage Wealth Management Group at (757) 321-3725 today. We’d like to get to know you.

9 Keys to Effective Decision Making

9 Keys to Effective Decision Making

Everyone deals with uncertainty in their lives, making decisions is one of the most difficult parts of being human. There are so many factors to consider when weighing your options – no matter the size of your decision. Here are some tips that will help you choose with confidence.

  • Consider those affected by your decision. Whenever feasible, get them involved to increase their commitment.
  • Avoid snap decisions. Move fast on the reversible ones and slowly on the non-reversible.
  • When making a decision you are simply choosing from among alternatives. You are not making a choice between right and wrong.
  • Be sure to choose based on what is right, not who is right.
  • Use the O.A.R. approach in decision making. Look at O, Objectives you are seeking to attain; A the Alternatives you sense are available to you; and R, the Risk of the alternative you are considering.
  • Choosing the right alternative at the wrong time is not any better than the wrong alternative at the right time, so make the decision while you still have time.
  • Remember that not making a decision is a decision not to take action.
  • Do not make decisions that are not yours to make.

At Heritage Wealth Management Group – we do our due diligence to follow these simple suggestions every time we make a decision. That’s why our investors trust us when it comes to important financial decisions. We want each and every client to feel that their financial decisions are important because they are the most important people in our professional universe. You deserve to work with advisors who put your interests first. Get in touch today or contact us at (757) 321-3725

Summer Daze – 2nd Quarter Market Commentary

Summer Daze

“Roll out those lazy, hazy crazy days of summer

You’ll wish that summer could always be here”

Nat King Cole – Those Lazy, Hazy Crazy Days of Summer

Heritage Wealth Management Group - Summer Q2 Market Commentary - Mark Tekamp

A recent newspaper headline was “June’s stock market returns best since 1955”. Those inclined to look back a bit further in time might recall a headline of several months ago; “First quarter marks best start to year since 1995.” Not wishing to dash cold water on what is meant to be a cheery message I do though feel it is appropriate that we be reminded that the first quarter’s 13.07% advance followed the prior quarter’s decline of 13.97% and June’s 6.89% advance followed May’s 6.58% decline. (All numbers based upon the return of the S&P 500). Most investors are looking at year over year returns through the end of June in the low to mid single digits confirming that the market over the past twelve months is better represented by a  teeter totter than a steadily ascending trendline.

Meanwhile, many observers of the US economy are forecasting the imminent demise of the economic recovery. One day’s headlines capture the mood. “U.S. Outlook: Is a Recession Coming, and What Could Trigger It?” “Anatomy of a Recession Webcast: Q3 Update”. “How to Prepare for the Next Recession: 9 Things You Need to Know”. The New York Times prepared to celebrate the tenth anniversary of growth without a recession, a record that has been exceeded only once previously in our national history, with a headline “Happy Anniversary, Economy! (Maybe. Sort of. On Second Thought…)”. The most frequently cited reason for the imminence of recession is  age. It’s been a long time since we had a recession so therefore it must be almost time for us to have one.

Bears on the prowl for bad economic news are not entirely lacking in evidence to confirm their suspicions. The manufacturing portion of our economy has slowed from its previously robust levels of growth. Global growth rates have clearly declined. China US trade tensions and the possibility of bad behavior by Iran and its impact on oil prices are wild cards in the deck of global economic growth prospects.

For this observer though, there is much that is happening that is positive but often overlooked. Central banks in Europe, China and the US are now inclined to ease financial conditions, a sea shift from twelve months ago. Real final sales to domestic purchasers in the US, one of the best measures of consumer demand that represents two-thirds of the US economy, grew 1.6% in the first quarter but is expected to increase to 2.8% in the second. The imbalances that are present prior to economic recession are absent. Testimony to this is the average age of residential housing in this country having increased by five years since 2006, the largest increase since the 1930’s, indicating that cyclical demand in our economy remains relatively depressed and therefore offering substantial potential to support future growth rates. Finally, expectations for the rate of growth in corporate earnings have declined increasing the likelihood of positive surprises.

A likely winning wager is that for at least the remainder of this year and the one to follow both the economy and financial markets will be deliverers of significant dosages of good news. Smile, be happy and enjoy the season.

Mark H. Tekamp

Windows & Mirrors

Windows & Mirrors

With the benefit of hindsight (the mirror portion of our title) the near 20% stock market decline from October 3rd through December 24th of last year is something that might have been anticipated. The combination of a 25% increase in oil prices and the yield on the ten year US Treasury bond rising from 2.50% to 3.20% through the first three quarters of the year married to a notable slowing in both US and global economic growth rates tossed a dose of reality like a bucket of cold water onto a scenario that had grown a bit too rosy and a resulting disconnect between hope and reality.

For investors weighted 60% in equities and 40% in fixed income the 4th quarter stock market decline of 16.7% left them with portfolio losses for the quarter of approximately 8.50%. Fortunately Santa, while delivering gifts to put under our trees, also provided investors a stock market rally starting on Christmas Eve and which continued throughout the first quarter of this year and continues still. The market decline of the 4th quarter was the worst in over seven years. The market recovery in the 1st quarter was the best in almost ten years. Investors may have found themselves recalling Dicken’s quote from “The Tale of Two Cities” (“It was the best of times, it was the worst of times…”) or perhaps somewhat more evocatively they may felt themselves possessed of Jody Foster’s spinning head in “The Exorcist”. So as we step up to the window and gaze ahead through the remainder of the year what do we see?

First let’s affix our gaze a bit more firmly upon the 1st quarter. The market (we’ll be referring to the S&P 500 index throughout this commentary) high of last year was on September 20th when it closed at 2930.75. The market close on Friday, April 12th was 2907.41 so we have yet to recoup the entirety of the market decline. The 60% equity & 40% fixed income portfolio returned 8.50%, an amount almost identical to the 4th quarter decline leaving most investors very close to break even for the past two quarters and approximately 3% positive year over year. While the stock market has spent the past six months creating and filling the holes it created in investor’s portfolios corporate earnings have continued to grow albeit at a slower rate. The market is now valued at 17.4 times earnings versus a thirty year average of 16.9 leaving bubble hunting bears with the need to look elsewhere for potential sources of woe and mayhem.

Perhaps we’ll want to title the next commentary “The J Curve” (as in Jay Powell, the chairman of the Federal Reserve) with the letter J tilted at a 45 degree angle and representing the prospective future course of the S&P through year end. The curved portion of the letter represents the remainder of the recovery from the prior decline and the upward sloping straight line of the letter represents the course of the market as it finds its way to new highs through the remainder of the year. For the remainder of this year at least Jay Powell will not dare to utter a single note of caution about the prospect of future risks of inflation or the possibility of interest rates being too low. Like Switzerland the United States Federal Reserve has wandered off the playing field, declared itself to be neutral and it will allow the US economy to grow as it will. Already there is data showing that economic growth rates are preparing to accelerate. Spring has arrived and warmer and better days lie before us. The party shan’t last forever but the beer is cold and the band is playing so what’s not to like?

Market Commentary

Market Commentary


The stock market’s 20% + return in 2017 led investors to approach 2018 feeling optimistic about the probability of the continuance of the good times. The market’s 10% return in the first three weeks of January last year seemed to confirm the likelihood of the fulfillment of that hope. Alas the market gave that all back and then some leaving most investors underwater some fraction of a percent by the end of March. The second quarter saw a modest recovery with most investors near breakeven at mid year. The third quarter saw the restoration of good times with returns of 3 to 4%. October the market rolled back over with many investors experiencing declines of near 5% for the month. November the market attempted to regain its footing with modestly positive returns but then December repeated the negativity of October creating additional losses of near 5% resulting in declines of 8 to 9% for the quarter and overall declines of 6 to 7% for the year. Note these are portfolio returns with weightings of 60% stock market and 40% bonds and cash. Investors with greater exposure to the stock market would have experienced somewhat more negative returns.

If we were to end our story here it would be a tale of moderate woe but the recovery in the stock market since Christmas has seen the market recover approximately half of its almost 20% decline from its September peak to its low of the year on Christmas Eve giving the average investor back half of their 2018 losses through Friday, January 17. So do we dare to hope that we need not fear the return of the market negativity we experienced a month ago or would it be wiser to hold onto our fears and forego our hopes?

While forecasting the future is an exercise entered into with the utmost of caution that should not preclude our grasping hold of what we know and using that to make a reasonably educated prediction of what 2019 may be offering investors. First the market decline of late last year was the market reacting to the probability of a significant slowing in the growth of corporate earnings through the first half of the year resulting from a slowing of the rate of economic growth. While viewed in isolation that would scarcely be viewed as good news it will likely create a policy response that will likely lead to a notable rebound in the stock market. The Federal Reserve having been unnerved by the market volatility accompanying its most recent interest rate increase will likely cease any additional increases through the first half of the year and possibly for its entirety. The trade dispute with China has already led that country to reopen the spigots of using borrowed money to build out infrastructure. The US political system with its divided congress defies hopes of building bridges to bipartisan understanding but a divided congress will nonetheless likely agree on the need to repair this countries bridges, airports and other parts of our infrastructure resulting in additional stimulus to our economy. All of these policy responses and others as well will lead to a rebound in economic growth rates in the second half of this year both in the US and globally. This is likely what the stock market is currently celebrating.


Investors should be encouraged to smile as they contemplate what this year has on offer. We have issues that will need to be addressed in future years but for 2019 its full pedal to the metal and investors should celebrate the reality that for this year at least they are an interest group whose interests the government is actively supporting.


Mark H. Tekamp

What Was That?

Yesterday (Wednesday) the US stock market (as measured by the Dow Jones Industrial Average) was seemingly on its way to a 200 to 400 point decline when apparently the bulls left early for the day and the bears were left without anyone to sell to driving the market down 800 points at the market’s close.

What was That

A few of the more honest commentators on the market offered “I don’t know” to explain the decline but those commentators without the luxury of professing humility as a justification for their employment were left offering “rising interest rates”, “pending recession”, “tariffs” and “rising oil prices” as among the most popular of their explanations.

3% market declines are uncommon if not unusual. Since 1952 the market has experienced declines of that amount or more ninety-eight times, twenty times since the bear market bottom of March 8, 2009 and three times this year. In the fourteen instances of market declines of that severity that have occurred since 1952 on Wednesday the market has on average recovered roughly half of the one day decline in the following two trading days perhaps leaving us grateful that if such madness must occur at least it happened mid-week.

Portfolio profits year to date have been mired in low to middle single digits so it is understandable that something so long sought should now be so sorely missed. The second quarter covered the first quarter’s deficit leaving most investors near breakeven at the year’s midpoint. The third quarter continued where the second left off leaving those in love with larger numbers feeling reasonably hopeful about the year. Since the start of October the market is down 5% leaving it up 4% for the year but foreign market declines and modest declines in bond values leave most investors just about where they were when the year started. So what now?

Market declines are like crime scenes. They do leave clues if one knows where to look for them so assuming the role of Inspector Renault from “Casablanca” let’s trot out a number of the usual suspects.

First bond yields. They are rising albeit modestly (4/5 of 1% for the ten year US Treasury since the beginning of the year) but NOT because of rising inflationary expectations but rather because of increased optimism about future economic growth rates. The Federal Funds Rate, the rate which recently the Federal Reserve has been increasing at most of its quarterly meetings, is now equal to the inflation rate meaning that borrowers are no longer being paid to borrow short term but they are still able to borrow free on an inflation adjusted basis.

Second Credit Default Swap Spreads. This is the cost of insuring corporate debt against the risk of default. When the markets become concerned about the prospects of declining corporate earnings the rates typically rise. They aren’t. Neither those for investment grade or high yield corporate bonds. At fifty basis points (1/2 of 1%) rates on investment grade bonds are at their lows since the Global Financial Crisis of 2008-2009.

Third the value of the US Dollar. At its current level it is at the midpoint of the 10% range between its highs and lows for the past five years. While up roughly 5% in the past year its down 5% from its level of three years ago. If the Federal Reserve’s interest rate increases were causing significant problems for the remainder of the world one would expect to see much more dramatic changes in the value of our currency. We aren’t and so it isn’t.

Fourth. The price of gold and the return on 5 year TIPS (treasury inflation protected securities). Gold for the past two years has been trading within a 10% range and has recently declined several percentage points. TIPS yields have migrated from zero to 1% over that same span of time. Both indicate that the market’s appetite for risk has been modestly increasing. Gold prices typically rise when the real economy is viewed as containing within itself an increasing degree of risk. And it isn’t. TIPS yields are expected to decline when the markets seek safety at the expense of return. That they are rising reveals an increased appetite for risk on the part of the financial markets.

What was That

So there we have it. Perhaps you are left though still wondering why the market fell. I’ll offer an explanation though briefly so as to not overstay my visit. China. Not tariffs. That is a symptom rather than a cause. China for years has been a margin play and like all margin plays it works well as long as the return on the money being borrowed exceeds its cost. When it doesn’t, and it hasn’t in all likelihood since the Global Financial Crisis, the system goes in reverse. China is yesterday’s growth story. Not tomorrows. But this is a story for another day.


Mark H. Tekamp

Time To Wake Up?

First there is watching grass grow. Then there is watching paint dry. But right behind is the stock market.

Ten years ago, in 2008, you may have chosen not to follow your investments due to one month’s bad news being followed by the next ones even worse. By way of contrast in the past four months you may have chosen to not follow your investments because…well, why bother? Each month ended pretty much where the month before ended. All this by way of reminder that the journey of an investor contains times of real joy and occasional times of fear but this current time of real boredom is well… boring.


First, allow me to review the perambulations of the market year to date after which I’ll connect several dots and create a scenario that I believe will be worth waking up for. Remember 2017? Every month the market went up. The amount varied but the direction seemingly was inexorably upwards. The first three weeks of this year was more of the same with the market up nearly 7% .Then the floor fell out from under it and by early March the market had fallen 10% though the subsequent modest recovery left it at break even for the first three months of the year. Since that time the market has gone back and forth like a hypnotist’s watch in front of your eyes first up a little, then down a little but frustratingly returning back to where it began the year. We’ll agree that back and forth is a great deal better than down and out but if you’ll allow me to explain the recent past I do believe that it will provide us a road map of where the remainder of this year’s journey is likely to take us.

Imagine a balloon. You blow into it and it fills up with air. You blow into it still more and its surface becomes tense with the internal pressure. That is a description of the stock market entering into this year. Normal markets experience an ebb and a flow where advances are followed by occasional and hopefully more modest declines allowing the market to rise while releasing its internal tension. The 2017 market was unusual in the absence of the usual. The January 2018 stock market rise was a happening looking for an accident and the market went down because of the imbalance created by investors enjoying significant returns while having experienced little in the way of risk. The 10% decline restored that balance and by early April the market had acquired an appearance somewhat similar to that of last year with the economy delivering the sunny news beloved of stock market bulls. That recovery was preempted a month ago by fears of tariff wars and it was those fears that drew the market down to low single digits by the end of June.

Focusing on the overall market though obscures a level of activity within it that has been hidden by the seemingly aimless meanderings of the various indices that tend to capture the headlines. Large cap growth is up 11.2% for the year to date. Small cap stocks are up 10%. For a year that is barely past half time those aren’t bad numbers and actually rival last years. But large cap value stocks are only breaking even and the seemingly permanently underperforming foreign markets are down overall near 3%. So you put the pieces together and you have overall stock market returns of plus 3% year to date through the end of June proving it’s hard to win a game when only half your players are participating. Psst…allow me to share a small secret with you though. The market is up 3 ½% since July 1st. This bull never died and like many investors was only sleeping. But the bull has awoken and this is likely to be a show you wouldn’t want to miss.


As I’ve shared with many of you in the past it isn’t good news or bad news that drives markets but rather whether the news is better or worse than the markets expected it to be so let’s spend a little time discussing the average investor’s expectations of the market. Everyone and their mother by now knows that the economy is doing quite well. Most didn’t expect it to do this well and most expect that this is likely as good as it gets. In other words, deceleration while still heading in a positive direction. That is what the market expects and that is what it is priced for. That is perception. What about reality? How about an economy that isn’t as good as it gets but rather one that is good and getting better? What if we have an economy that is not only growing near 4% currently but an economy that grows at that rate or even faster for the next four to six quarters? If that is reality and reality is far more positive than expectations then the market may well be poised to experience a “positive shock” meaning that monitoring your investment returns through the end of the year may well qualify as a spectator sport worth buying a ticket for.


Mark H. Tekamp