December Jobs Report, 2019 Outlook and Portfolio Repair Strategy


By Ken Mahoney

Last Friday we had a great jobs report, with 312,000 jobs created through December, bringing the 2018 total jobs tally to 2.64 million. Another reason to feel hopeful is that Federal Reserve Chairman Jerome Powell’s dovish comments highlight that he does in fact recognize the softness to the financial markets. Saying he’s “patient” and flexible, Powell claims to have the markets’ back. He is prepared to adjust the balance sheet to $50BN per month and with no word on raising rates, his dovish comments sent the market up by 600 points on Friday. Seems we will no longer be on autopilot!

It is important to remember that we want the Fed to be done with their hiking cycle because they’ve done their job, not because the economy is weakening in its face.

Ken MahoneyIt must be noted from 2012-2016 earnings growth was only 3% and yet year-on-year, the stock market had double-digit returns. Investors seem to be scratching their heads and rightly so. In 2018, year-over-year growth was 25% yet it was coupled with a negative 7-10% market. This is mainly because of the Fed, and when the Fed is easy policy, we have multiples that expand, like we saw from 2012-2016, more recently these multiples have contracted, which is a concern that hangs over this market going into 2019.

The last quarter of 2018 and continuing into the New Year, the markets have taken a toll on your investment portfolio/retirement accounts.

When analyzing President Trump, he needs to act fast and get a trade deal done before significant collateral damage is caused across the economy and markets. The government shutdown is also a growing concern, which is creating a lot of bottlenecks, for example the SBA (Small Business Administration) is closed, bankers have deals they are unable to complete, and these deals are in place to help fund new business and new business activity. Most importantly, investors need a break, and one of three things needs to happen: Fed Powell must lay off raising rates, an agreement over a good China policy, and the reversal of the government shutdown.

The Markets Have Not Been Kind To Investment Portfolios/Retirement Accounts

If you’re like most investors, the last quarter of 2018 and continuing into the New Year, the markets have taken a toll on your investment portfolio/retirement accounts. Nothing in the market goes up or down forever. If you recall back to the beginning of 2016 the markets looked much the same as they do today. The age-old saying on Wall Street that “markets go up by way of escalator” held true to form and it seemed as if setting new record highs on all markets was commonplace. A nice steady rise became the new norm, until it wasn’t. Unfortunately, the other half of that age-old saying is “Markets come down by way of an elevator” is also holding true to form. Gains that took the last two years to build have been dramatically impacted downward just in a matter of just a few weeks.

The first step to repair your portfolio is to reassess your risk tolerance for today’s market realities and truly understand where you are at today. If you have retirement investments like 401k, IRA’s, or other qualified investments your risk tolerance changes over the years as you get closer to retirement and adjustment for that should be made. A properly designed retirement plan for someone with 20 years to retirement will look totally different than someone with five years to go. Most people fail to understand how they should adjust their asset allocations to account for changing risk tolerances as we age. We all have heard there should be a mix of stocks and bonds in a properly allocated portfolio and we agree.  A 45-year-old holding high-yield corporate bonds or corporate bond ETF’s in a retirement portfolio would be appropriate. That same asset allocation would not be appropriate for a 60-year-old with a few years left until retirement. Treasuries or an ETF structured on Government obligations would be better suited for someone closer to retirement. Corporate bonds are susceptible to the same market swings as the corporate equities, stock’s. An older person with a shorter widow to retirement must not just hope that retirement comes along when the markets are good or continue to work until they are.

Map Out A Plan

After you have analyzed where you are currently with your investments then its time to map out a plan. We do not recommend people become day traders. We also do not recommend investors buy and hold as a complete strategy. Based on a thorough analysis as referenced earlier to establish risk tolerance there are strategies that can help to smooth out the market volatility and take advantage of what the market is giving investors right now.

The market will always present opportunities for investors and we must be prepared to take advantage of this. For example, if the market remains unchanged for the year or even down, holding a majority of index funds or blue-chip stocks throughout the year won’t offer any gains and your portfolio will mirror the market’s stagnant growth. Therefore, it is key that when we do have these huge sell-off’s like the ones we saw in February, October, and December of 2018, we pick up shares in sound large cap growth sectors at a cheap price. Equally, we must be aware that when we see big market run-ups, prior to market news or data announcements that we sell into these We saw these growth periods through the months of July, August and September of 2018.

No matter what method of portfolio repair or reallocation you choose, the most critical factor is identifying your long-term goals for investing in the first place. That could be a successful and fulfilling retirement, leaving a legacy for your children or grandchildren, starting your own business etc. Equally important is understanding what it will take for you reach those goals. Mahoney Asset Management offers investors a tool, The GPS Projection, absolutely free of charge that will aid you in understanding where you are today and what your path will look like in the future if you continue to do exactly what you are doing now.

Investor, FOX Business contributor, WHUD radio host, author of 7 books including Not Your Father’s Retirement and licensed financial advisor for more than 27 years, Ken Mahoney is the CEO of Mahoney Asset Management. To get a free copy of the e-book, call 845-371-0101 or email