Catalysts, Earnings and the SECURE Act – Entasis Newsletter 4Q19

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Section Summary

  • Market Notes – Equity and fixed income markets broadly moved higher during the fourth quarter, primarily driven by an accommodative U.S. Federal Reserve and signs of progress in the U.S. and China trade spat. On the economic front, news was mixed, but most investors focused on strong U.S. consumer data that they hoped would prop up tepid U.S. GDP growth and overcome softness in the U.S. manufacturing sector.
  • Equity & Fixed Income Comments – Our portfolio positioning in the equity and fixed income components of client portfolios continues to reflect our relatively cautious outlook for U.S. equities and U.S. corporate bonds. The broad rally left us with few opportunities to be active searching for value. On the equity side, two areas that we have not increased investment yet, but are patiently waiting for more attractive entry points are U.S. value stocks and U.S. small-cap stocks. Within fixed income, we continue to like the higher quality and non-cyclical parts of the credit markets and favor securitized assets, mortgage-backed securities, insurance-linked securities and emerging market debt.
  • Research Focus – At the end of 2019, Congress quietly passed the SECURE Act, which ushered in the largest retirement planning law changes in over a decade. It is intended to strengthen retirement planning for all Americans. The Act has a number of relevant implications for investors.
  • Client Focus – Over our careers we have learned that market catalysts are almost always discussed with certainty in hindsight even though they were often unpredictable before they occurred. How can catalysts be accounted for when making investing decisions?