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Articles by Alan & Akemi

Grinning with Fingers Crossed

It's hard to make sense of a market that took us through a painful decline at the end of last  year, followed by an abrupt and unexpected recovery at the beginning of this year. The first quarter of this year gave us the biggest one-quarter gain since 2009. Then, the trend continued through the second quarter with more modest gains. This was despite warnings about an overdue recession, challenges to the economy, and trade wars. Investors are grinning at the strong performance, but behind their backs, they have their fingers crossed.

THE GOOD NEWS

The good news is that just about every investment asset produced gains in 2019’s second quarter.  The Wilshire 5000 Total Market Index—the broadest measure of U.S. stocks—rose 3.99% in the most recent three months, and now stands at an 18.66% gain for the year.¹  The comparable Russell 3000 index is up 18.71% so far this year.²

Looking at large cap stocks, the Wilshire U.S. Large Cap index gained 4.19% in the second quarter, closing out the first half of the year with a gain of 18.74%. The widely quoted S&P 500 index of large company stocks was up 3.79% in the second three months of the year, and is up 17.35% in the first half of 2019.³

As measured by the Wilshire U.S. Small-Cap index, investors in smaller companies gained 2.03% in the second quarter, and are up 17.85% so far this year.  The technology-heavy Nasdaq Composite Index gained 4.40% in the second three months of the year, and is up 20.66% at the year’s half-way point.⁴

International investors are also sitting on gains.  The broad-based EAFE index of companies in developed foreign economies gained 2.50% in the second quarter, and is up 11.77% so far this year. ⁵

Real estate, as measured by the Wilshire U.S. REIT index, posted a 1.63% gain during the year’s second quarter, for a 17.92% gain for the first six months of the year.  The S&P GUCCI index, which measures commodities returns, lost 1.42% in the second quarter, but is still up 13.34% for the year.  Energy prices are up 22.80% in 2019, while precious metals have gained 8.86% so far this year.⁶

THE BAD NEWS 

The bad news is that just about every investment asset produced gains in 2019’s second quarter. Why is that bad? Normally, investors want to buy low and sell high, but when every asset class is doing well, it's hard to decide what to buy and what to sell.

Having a globally diversified portfolio and a financial advisor that does regular, quarterly rebalancing can solve this dilemma. Every 3 months, your advisor will look at the performance of each asset class in your portfolio. When one of your 15 asset classes goes up more than 4% in a quarter, it's an indication to sell a little while it's at a peak, and put the proceeds into another asset class that is a bargain at the time. When you use the discipline of quarterly rebalancing, it takes emotion out of the decision-making.

You might expect that strong performance in the first half of the year would be followed by a correction or decline in the second half. However, that hasn't been the case historically. Over the 120-year history of the Dow Jones Industrial Average, the Dow has risen 66.4% of the time from July through December. If the Dow did well in the first half of the year, the odds of a positive second half were even better, at 72%.⁷

The challenge is unpredictability. Recently, the U.S. and China called a cease-fire in their yearlong trade war, but we know that's not the end of the war. As we approach the November elections, partisan clashes can affect the market. And there's always the fallout from misguided policy decisions, as we saw with the government shutdown last December. Be prepared for surprise.

A balanced, broadly diversified portfolio can help. Not having all your eggs in one basket can capture market returns, while reducing volatility, and providing more downside protection in the event of a market correction.

¹ Wilshire index data: https://www.wilshire.com/indexcalculator/index.html

² Russell index data: http://www.ftse.com/products/indices/russell-us

³ S&P index data: http://www.standardandpoors.com/indices/sp-500/en/us/?indexId=spusa-500-usduf–p-us-l–

http://www.nasdaq.com/markets/indices/nasdaq-total-returns.aspx

⁵ International indices: https://www.msci.com/end-of-day-data-search

⁶ Commodities index data: http://us.spindices.com/index-family/commodities/sp-gsci

https://www.marketwatch.com/story/chances-are-the-us-stock-market-will-be-higher-by-year-end-but-theres-a-catch-2019-06-25?mod=moremw_bomw

This commentary on this website reflects the personal opinions, viewpoints and analyses of the Kondo Wealth Advisors, Inc.  employees providing such comments, and should not be regarded as a description of advisory services provided by Kondo Wealth Advisors, Inc.  or performance returns of any Kondo Wealth Advisors, Inc.  Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Kondo Wealth Advisors, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.

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EDUCATIONAL WORKSHOPS

2019 SCHEDULE 

YOUR 2019 INVESTMENT STRATEGY

Saturday, March 16, 2019

9:00 a.m. - 11:00 a.m.

South Pasadena Public Library Community Room**

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**This activity is not sponsored by the City of South Pasadena or the South Pasadena Public Library

 

YOUR 2019 INVESTMENT STRATEGY

Saturday, March 23, 2019

9:00 a.m. - 11:00 a.m.

Ken Nakaoka Center*

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HELP YOUR CHILDREN WITH FINANCES

Saturday, May 4, 2019

9:00 a.m. - 11:00 a.m.

Ken Nakaoka Center*

1670 W. 162nd St.,

Gardena, CA  90247

*Not sponsored by the City of Gardena

 

HELP YOUR CHILDREN WITH FINANCES

Saturday, May 11, 2019

9:00 a.m. - 11:00 a.m.

South Pasadena Public Library Community Room**

1115 El Centro St.,

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**This activity is not sponsored by the City of South Pasadena or the South Pasadena Public Library

 

YOUR RETIREMENT CHECKLIST AND LTC/LI HYBRIDS

Saturday, July 13, 2019

9:00 a.m. - 11:00 a.m.

Kondo Wealth Advisors Pasadena Office (tentative)

300 N. Lake Ave. Suite 920

Pasadena, CA  91101

 

YOUR RETIREMENT CHECKLIST AND LTC/LI HYBRIDS

Saturday, July 20, 2019

9:00 a.m. - 11:00 a.m.

Ken Nakaoka Center*

1670 W. 162nd St.,

Gardena, CA  90247

*not sponsored by the City of Gardena

 

INVESTING AFTER AGE 70.5 AND RMDs

Saturday, September 7, 2019

9:00 a.m. - 11:00 a.m.

South Pasadena Public Library Community Room**

1115 El Centro St.

South Pasadena, CA  91030

**This activity is not sponsored by the City of South Pasadena or the South Pasadena Public Library

 

INVESTING AFTER AGE 70.5 AND RMDs

Saturday, September 14, 2019

9:00 a.m. - 11:00 a.m.

Ken Nakaoka Center*

1670 W. 162nd St.,

Gardena, CA  90247

*not sponsored by the City of Gardena

 

 

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