Pence Perspective

Pence Perspective | Q1. 2020 Executive Summary: 2019 was one of the greatest years for stocks. The S&P 500 was up 28.9% (or 31.5% including dividends), the second highest return since 1997 or fifth highest return since 1958. For 2020, we expect between high single-digit and low double-digit stock returns. We see fewer headwinds in 2020 compared to last year which may favor stocks over bonds. “Phase One” pact between the U.S. and China is done. Brexit is almost over. The global growth slowdown probably bottomed in 2019. The Fed is on hold, meaning we expect mortgage rates [...]

Pence Perspective | Q1. 2020 Clear Eyes, Steady Hands Executive Summary: We think 2019 will be a positive year for stocks but expect continued market volatility We expect one rate hike from the Federal Reserve in 2019 We do not expect a recession in the United States in 2019 or 2020 We expect a short-term resolution on trade tensions Bottom Line Up Front: A good economy and a bad market don’t coexist for long. However, share prices can fall for many reasons other than economic developments. Good economic news and robust corporate earnings reports powered the S&P 500 to its all-time high on September 20, where it [...]

Pence Perspective | Q3. 2018 More Reasons To Be Optimistic Bottom Line Up Front: Rising interest rates and escalating trade tensions have contributed to an increase in equity volatility during the first half in 2018. This will most likely continue until (and after) the November mid-term elections. Meanwhile, markets are expected to continue to benefit from tax reform and global growth, despite the latter exhibiting slowing momentum. Stock prices at their core are reflections of earnings expectations and— according to FactSet, analysts are projecting earnings growth of 20% and revenue growth of 8% for all of 2018. The [...]

Pence Perspective | Tax Reform Bottom Line Up Front The U.S. stock market has been mostly smooth sailing and major stock indices are positive for the year.[1] Meanwhile, we have had the lowest daily decline (the smallest maximum drawdown) in the history of the S&P 500 index.[2] There are several reasons why the markets are up and volatility is low. First, in the third quarter of this year, corporate profits reached an all-time high. The most obvious explanation for rising corporate profits is that the U.S. economy is well into a long, slow, and steady recovery. Second, less [...]

Pence Perspective | GDP Growth Bottom Line Up Front If there is one thing that investors dislike more than bad news, it is uncertainty.  As we stated in our April newsletter, the US economy is currently in the Implementation Stage, where financial markets eagerly await Congress to enact President Trump’s policy agenda.  The objective is simple: move the economy from an anemic 2% gross domestic product (GDP) growth rate to a more meaningful 3% or higher.  We believe it is achievable if the government passes pro-growth fiscal policies such as tax reform and deregulation. On the bright side, [...]

Pence Perspective | What to Expect From Trump's Presidency US Election: Clinton Lost, Less Gridlock in Washington On November 9th Donald J. Trump was elected as the 45th president of the United States.  He will be the first president with no government or military experience. Unofficial election results indicate that Hillary Clinton got 5 million fewer votes than Obama did eight years ago, the voter turnout in this election was lower than the previous two. This means that the new administration will need to move extra fast to make its mark if it wishes to have long term [...]

Pence Perspective | August 2016 Bottom Line Up Front: In June, we suggested that the market would go down 5% before it would go up 10%. That was the case in the aftermath of Brexit. The decline was fast, violent, and short-lived. From the Brexit-low, the S&P 500 Index has rallied 9.7% and the market has reached an all-time high. The lessons of the last two years have shown us that being tactical is very important even for the long-term investors. For the past two years, we have had a 10% or more downturn between July and November. [...]

Pence Perspective | June 2016 Bottom Line Up Front: Given recent market volatility and the present level of uncertainty among investors, we believe it is prudent to maintain a somewhat larger position than normal in cash or short-duration bonds. Cash continues to be attractive for three reasons. First, with yields on the usual fixed-income options near historic lows, the opportunity cost of holding cash is lower today than before the Great Recession. Second, markets are exhibiting unusual patterns of volatility driven primarily by sentiment: market moves are highly susceptible to each news headline. Given high valuations and profit [...]

Pence Perspective | May 2016 Views of Mohamed El-Erian, Our Guest of Honor, on Markets, Economics and the Political Environment For our first Thought Leaders Conference, we were pleased to have Mohamed El-Erian join us at the Hotel Irvine on February 18 to discuss his recently published book, The Only Game in Town:  Central Banks, Instability, and Avoiding the Next Collapse. Mohamed is the chair of President Obama’s Global Development Council and chief economic adviser at Allianz, the corporate parent of PIMCO, where he was previously the chief executive officer and co-chief investment officer.  Foreign Policy named Mohamed [...]