Folks,

As I send you this note, it is early morning on New Year’s Day. I have a friendship with this moment, a habit I acquired when my kids were growing up. More so than on any other morning, our house would be very quiet with everyone else still asleep. It was an ideal time to contemplate all the possibilities the new year might bring – and too early for real-life events to make a complete mess of my blank canvas.

After 2018’s rough treatment of stocks, this morning’s time for reflection is more appreciated than ever.

Investors enter 2019 with a bushel full of unanswered questions. Has the Fed hit an inflection point with its interest rate increases? Will there be changes in the Administration’s strategy for dealing with China and other adversaries… and allies? These are just two of many questions the market is grappling with. You could say this market has issues.

For a good discussion of these issues, check out our upcoming newsletter in which my colleague, Jim Arens, lays out the market’s challenges and where we think stocks are headed in 2019.

For now, take a look at the chart below. While the recent volatility may seem abnormally high, it comes on the heels of a period of unusually low volatility. We should also remember investors made it through – and profited from – the last 10 years, when volatility was a more common occurrence.

While 2019 is likely to test us in sundry unforeseen ways, I’m optimistic we will be better off a year from now. It’s not shaping up to be a straight line though. We’re hitting inflection points with several market-impacting concerns and it’s not likely all will break to the upside.

Happy New Year. Now, go paint your own blank canvas. It’s good therapy, if nothing else.

Cheers,
Bob