Love Your Portfolio – 2020
Doug Walters
Is your relationship with your investment portfolio a one-night stand or a lifetime partnership?
Contributed by Doug Walters , Max Berkovich
U.S. equities are loving this moderate growth, low interest rate environment, hitting new all-time highs with momentum stocks leading the way. Coronavirus? What coronavirus? Despite the continued spread of the virus, some experts are now saying they can predict a near-term plateau and decline. Emerging Market stocks celebrated. Is it too late to say, “we told you so?” Absolutely. But as we mentioned in the past few weeks, these horrible viruses do not have a history of negatively impacting long-term returns of a well-diversified investment portfolio.
Whether there is a pandemic, a geopolitical shock, a catastrophic natural disaster, or a stock market crash, our recommendation is to “love your portfolio.” Your relationship with your investment portfolio should not be a one-night stand, but a lifelong partnership. When constructed well, your portfolio is designed not just to survive these shocks but take advantage of them. Will your portfolio go down if the stock market crashes? Probably. But it will also have the opportunity to add to some holdings that just went on sale! So, in honor of Valentine’s Day, take this opportunity to strengthen your appreciation of your robust investment portfolio.
Headlines This Week
The Good Place
- Federal Reserve Bank of New York President John Williams reiterated on Thursday that the U.S. economy is in a very, very good place.
- He argued that rate cuts have helped the U.S. economy to expand, and the Fed has control over the overnight lending funds rate.
Consumer effect
- U.S. retail sales rose in January on the back of a healthy consumer, supporting the view that the U.S. economy is in a good place.
- Consumer Confidence measured by the Michigan Sentiment Index remains near a 19-year high.
Good Enough
- Over 77% of S&P 500 companies have reported earnings.
- Over 65% of the companies are beating their sales and earnings expectations.
The Week Ahead
Reporting: Medtronic (MDT), Ventas (VTR), and Deere & Co. (DE)
- Medtronic recently issued a recall through the FDA for two of its insulin pumps, including a model that helped drive growth last quarter.
A quiet week for the U.S.
- On Wednesday, the Federal Open Market Committee will release their minutes from their most recent meeting in January.
- Given that Chairman Powell testified in front of Congress this week, this release may not carry as much weight as it would have otherwise.
- Preliminary figures for February Manufacturing and Services PMI’s will be released on Friday, which could give an initial glimpse into any impact of the coronavirus.
President’s Day on Monday, February 17th.
- Banks, stock markets, and bond markets will all be closed.
Stock Highlights from Max
No Love Lost
Another solid week for the markets and our Energy sector isn’t the biggest laggard, that distinction goes to Communication Services this week. The top sector is Consumer Discretionary, thanks to an enthusiastic response from investors to earnings from…
- Expedia Group, Inc. (EXPE) beat earnings expectations and came a little short on revenue. The operator of online properties expedia.com, hotwire.com, hotels.com, Travelocity.com, and Orbitz provided a pleasant surprise when it reported gross bookings increased by 5.9% in the quarter. Overcoming softness in international bookings with a 7% domestic growth number. Room nights stays were up 11% in the quarter. This metric indicates that travelers stay longer per booking, which usually leads to higher profit from the booking as costs diminish with a more prolonged stay. Stabilization in room night stay growth was comforting as that number declined in the previous quarter. Not everything was rosy as the company reported 8% lower flight revenue and 9% lower revenue per flight ticket, and Chairman Barry Diller did sound cautious about the impact of the coronavirus. Barry Diller, the legendary media mogul, took over running the company after a surprising parting of ways with both the CEO and CFO in the quarter. The company was slammed by investors after last quarter, as Google’s (GOOG, GOOGL) search optimization steered traffic away from Expedia’s sites to Google’s services. No love was lost between the two companies, but Diller did note on the conference call he held direct talks with the search giant about his complaint about competing against their advertisers. He called the behavior anti-social and called on the government to get engaged in the issue. Speaking of government engagement…
- The Federal Trade Commission issued a request to five of the biggest technology companies to provide information about prior acquisitions not reported to antitrust authorities going back to 2010 and onwards. This request impacts Facebook, Inc. (FB), Alphabet Inc. (GOOG, GOOGL), Apple Inc. (AAPL) and Microsoft Corp. (MSFT). We own all of them, so stay tuned to see how that plays out. Speaking of big tech…
- Cisco Systems, Inc. (CSCO) failed to impress with its customary penny earnings beat and was rumored to be shopping for cybersecurity firm FireEye, Inc. (FEYE).
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