Q3 2019 Market Street Quarterly Commentary


On-again/off-again trade negotiations/threats/tweets with foreign governments, primarily China, continued to have influence on short-term market movements during the third quarter and into the month of October. The stock markets do not like the uncertainty surrounding this topic. As disputes threaten to escalate, the stock market has declined. As prospects improve for new trade deals, stocks have recovered. This cycle has repeated itself many times over the past couple of years.

Failure to resolve these issues is starting to have longer-term implications for the global economy as economic activity has slowed in most of the world, including the US. The lack of trade certainty has caused businesses to become very cautious in their investment in capital projects. These lack of investments not only have a short-term impact on economic activity but also will reduce, or at least delay, future productivity gains which are crucial to increasing economic growth, particularly in countries with low or no growth in the working age population such as the United States.

The resolution of these matters is hard to predict in terms of both timing and form. However, just the removal of the uncertainty will benefit all. Let’s hope that this occurs soon.


Growth stocks have had the upper hand in terms of performance when compared with value stocks over the past several years. These types of cycles have occurred at various times in the past, but over the long haul, value investing has provided better returns, particularly when viewed from a risk-adjusted perspective. Of course, no one knows for sure when the trend that has been observed for the past decade will reverse, but the reversal can happen quickly and dramatically. The following article from Dimensional Fund Advisors (DFA) provides some interesting data on the reversal of one of these cycles earlier this century: Value Judgments: Viewing the Premium’s Performance Through History’s Lens. Some of the facts in this article reinforce our bias for having a larger proportion of our clients’ equity exposure in value stock funds.


As you might have heard, Schwab announced earlier this month that they would be eliminating their transaction fees for stocks and ETFs. These formerly ranged from $4.95 to $8.95 per trade. While stock and ETF transaction fees have never comprised a significant expense in our managed portfolios, we are happy to see our clients benefit from Schwab’s pricing change.


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