We are pleased to report that our clients are having their best year since 2009. In our opinion, the strong recovery of this past year makes perfect sense. After a terrible finish to the markets in 2018, we argued that the markets were severely oversold. In fact, last December, we wrote the following in a note to clients:

Our strategy in the face of market declines has remained consistent for over 25 years. In February of this year, the U.S. stock market sold-off on worries about a potential recession. The most recent drop is due to worries about interest rates rising too fast because the economy is too good. We believe that the North American economy is neither so good that interest rates will rise too far, nor is it so weak that a recession is imminent. Just as it has in the last ten years, we believe that the North American economy will continue its slow ascent and will suffer its usual fits and starts. We are moving ahead with the same cautious approach we have always taken. While we remain fully invested, we will stick to high quality corporations that have strong balance sheets, that generally have a history of raising dividends and that have a long runway of growth for their products and services.

As we look forward to 2020, we believe that conditions are ripe for our clients’ portfolios to continue to improve. You can hardly ask for a better investing environment: Corporate profits for U.S. companies are at record levels, employment is near record levels and interest rates are low (and probably not going higher any time soon). Also, the signing of the phase one trade agreement between U.S. and China will add much needed confidence to the global economy. For those skeptical about investing when the market is at an all-time high, we have good news for you – historically, after hitting a high, the market is higher six months later more than 80% of the time.

We know that many challenges lay ahead in 2020. The North American economy is still suffering from the after effects of a prolonged trade dispute and has yet to find its footing. In addition, we expect to see volatility as we get closer to the U.S. Presidential election.

However, as always, we take our cues from the companies in which we invest. We saw significant dividend increases and material share-buyback announcements from our portfolio companies. We expect higher earnings from our portfolio companies in 2020, and our research team continues to hunt for better investment ideas.

We look forward to the opportunities and the challenges that 2020 will bring, and we are optimistic that the current highs in the stock market will beget new highs.