The Archer Funds Disclosure:
You should carefully consider the investment objectives, potential risks, management fees, and charges and expenses of the Fund before investing. The Fund's prospectus contains this and other information about the Fund, and should be read carefully before investing. You may obtain a current copy of the Fund's prospectus by calling 800-
Past performance is not guarantee of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
2020 Annual Outlook and the Decade Ahead
Posted: Monday 1/6/2020 12:48 PM ET
"More money has been lost anticipating a correction than actually in one." – Peter Lynch
Before we can discuss the decade ahead, we must take a look at the decade behind us. We finished off 2019 with one of the best years in the S&P 500 up 31.49%; helping the S&P 500 to an annualized 13.5% gain in the last decade. This was made possible by the extreme recession in 2008-
The future will look much like the past or at least rhyme with it. The market for the next decade will be dependent on the growth of Corporate earnings. Yes, there will be gyrations with politics and geopolitical events and other hurdles not yet seen. However, at the end of the day, we will look to the earnings. If they are higher, it is likely the stock market is higher. If earnings are lower or grow in a slower manner, the market will do the same. There is a clear correlation with earnings and performance over periods of time. So, how about 2020? Currently, consensus estimates are for earnings to increase 9.6% for the full-
The earnings in 2020 are expected to be propelled by the following sectors: Energy, Industrials, Materials, and Consumer-
Let's also realize we are in an election year. It is obvious to even the casual observer the US has become more divided politically. In 2020, President Trump is up for reelection. There is power in being an incumbent President as far as the market is concerned. When an incumbent is up for reelection the Dow has returned 10.1% in election years vs. -
We continue to see positive signs in the economy. Home construction has remained strong as new housing starts have been fueled by increasing demand from Millennials. In addition, auto sales continue to keep pace with past years, staying in the 17 million range. When an economy has low consumer energy prices, is a net exporter of energy, low interest rates, backlog of housing starts, and auto sales staying steady, we are likely to see a higher stock market. The two factors that this all depends on is the consumer and jobs. Unemployment levels (seen in chart below) are at historic lows and if this continues, a recession is unlikely.
Let's discuss China for a moment. It appears trade tensions with China have eased just in time for the election season to begin. We have put together a phase 1 plan of trade with China which has caused some disruption in 2019 to supply chains and imports. However, US manufacturers in 2019 have begun to shift manufacturing to Taiwan, South Korea, and India where we see imports increase as of May 2019 by 22%, 12%, and 12% respectively. Although we expect more pressures to remain with China, it is a good sign our country's reliance on a single country is waning.
The last item we would like to point out is the continued disparity with Value vs. Growth. Clearly in 2019 Growth was the leader outpacing Value in performance by nearly 10%. This trend at some point will end. We started to see some reversion to the mean in 2019, but nothing remotely what we expect. We can see that value is still in an oversold position as indicated by the red circle on the chart. We believe investing in value in addition to growth will benefit investors over a long-
The market will continue to maintain pace give or take based on earnings. Interest rates are in a current holding pattern and unless we see a spike in the 10-
The Archer Team
Troy C. Patton, CPA/ABV
Steven C. Demas
John W. Rosebrough, CFA
The opinions contained herein are not intended to be investment advice or a solicitation to buy or sell any securities. Archer Investment Corporation manages The Archer Funds. You should carefully consider the investment objectives, potential risks, management fees, and charges and expenses of the Fund before investing. The Fund’s prospectus contains this and other information about the Fund, and should be read carefully before investing. You may obtain a current copy of the Fund’s prospectus by calling 800-