A look back at the first half of 2019 — and where we might be going next

The first six months of 2019 are officially in the books. With a 17% gain for the S&P, we just enjoyed the best first half to a year in more than two decades. We hope you’ve seen similar — or better — gains in your portfolio.

As I write Tuesday morning, the S&P is touching record highs that are an extension of yesterday’s rally.

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Monday saw the markets climb on news over the weekend from the G-20 summit that the U.S. and China have agreed to hold off on new tariffs while trade negotiations continue.

Even though nothing truly “new” came out on the tariff front, the cooperative tone between the U.S. and China was good enough for Wall Street … for now.

But remember, there’s still no clear path toward a comprehensive deal at the moment. Given this, the same quick-trigger emotions that applaud basically “nothing substantive” from the G-20 can quickly sour on hints of negative news.

For now, though, we’ll enjoy the new high, which is a great punctuation mark on the close of an amazing first-half of 2019.

Given this mid-way moment of the year, in this Digest, let’s pull back for a bigger-picture view of where we are, the next market-challenges to tackle, and then we’ll discuss a simple portfolio diagnostic you can run today that can help you avoid a common investing mistake. The goal is simple — keep those big gains coming.

Let’s jump in.

***It’s been a great six months for the financial markets

Looking around the globe, the gains have largely been everywhere …

Global stocks collectively added $8 trillion in value, as the MSCI world index has leapt 15%. The U.S. stock market is up 17% as referenced above, while China has rallied 20% and Europe has tacked on 13%.

U.S. government bonds have climbed 7% as their yields have fallen nearly 70 basis points (this is a big-time move in just six months).

Oil has popped nearly 25%.

Gold has hit a 6-year high, climbing more than 10%.

And just to show you crytpo fans some love, bitcoin is up 220% (though by the time this publishes, that number will likely be wildly different given how volatile it has been of recent …)

***On a more micro level, here at InvestorPlace, we’ve seen some amazing gains as well

Matt McCall gave his subscribers the chance to bank 622% returns through his legalized marijuana pick, Akerna. Amazingly, most of that came over a period of just three days.

Eric Fry helped his readers lock in a series of gains through shorting shares of the troubled pharmaceutical company, Teva. There was the first 75% gain, followed by a 134% gain, and finally 162%. The blended percentage gain of the overall Teva trade currently stands at 131% (part of it is still open).

John Jagerson and Wade Hansen have enjoyed an incredible run of winning closed, put-write trades. As I write, the guys are 91 of 91, posting an average annualized return that’s roughly 48%.

Louis Navellier took advantage of 2019’s market strength to help his subscribers close out a string of 100%+ winners. Specifically, during the first half of 2019, Louis locked in a 274% gain from NVDA, 115% from WP, 211% from IIN, 122% with NFLX, and 150% from WWE.

Finally, Neil George’s 10 highest-yielding stocks, bonds, and funds have been paying subscribers an average yield of 8.5% over the first half of 2019. Topping that list are MFA Financial at an 11.1% yield, and Hercules Capital at 10.06%.

Congrats to all of our subscribers who have joined in on these great gains and yields.

***While that’s a lot to cheer, the next several weeks are very important for what happens over the rest of 2019

July will set the tone for the back-half of 2019. Wall Street is going to be looking at three things in particular — trade talk momentum, Q2 earnings, and the Fed.

On the trade war front, Trump just said “we’re going to work with China where we left off,” but major doubts persist regarding the two nations’ willingness to compromise on major issues such as the protection of technology and trade secrets. The trade war news that comes out in July will be important for investors looking to price-in the presence, or lack, of tariffs as 2019 rolls on.

Furthering that, today there’s news that Trump is now targeting Europe in his tariff crosshairs. Reports suggest he’s considering $4 billion in tariffs on cheese, scotch whiskey, and olives, among other goods. The spat was sparked by aircraft subsidies given to US aircraft maker Boeing and its European rival, Airbus. Whatever the reason, additional tariffs are likely to hurt corporate bottom lines.

Related to this is Q2 earnings season, which has already begun, though kicks into full gear in a couple weeks.

The research company, FactSet reports that Q2 will see an S&P earnings decline of -2.6%. If that number holds up, it will mark the first time the index has reported two straight quarters of year-over-year declines in earnings since 2016.

Heading into earnings season, 113 S&P 500 companies have issued EPS guidance for the quarter. (Guidance is simply a projection or estimate of earnings, provided by a company in advance of the actual results announcement.) Of these 113 companies, 87 have issued negative EPS guidance. If that’s indeed the case, it will mark the second highest number of S&P 500 companies issuing negative EPS guidance for a quarter since FactSet began tracking this data in 2006.

The financial press is already trying to spook investors — for instance the headline below …

But they did this in Q1 and it wasn’t the earnings apocalypse that had been feared.

In fact, given the negative sentiment, the hope is that any positive surprises could help the market maintain its positive momentum.

One area of earnings that will be interesting to watch is the tech sector. You see, the S&P gains from Q2 have been led by some of the FANG tech stocks. For instance, Facebook surged 44%, Amazon 27%, and Netflix soared more than 38%.

If you take five of the S&P’s top performers of 2019 — Facebook, Amazon, Apple, Microsoft, and Disney (not exactly a pure tech company) — the combined value of these companies is now $3.4 trillion. That makes up 14% of the entire S&P. Given this, how their earnings numbers come in for Q2 will have a significant impact on the broader market. We’ll be watching closely.

Finally, there’s the July Fed meeting. As we noted in a recent Digest, there’s now a 100% expectation of a July rate cut — this issue is simply “by how much?”. As we stand at the time of this writing, odds are for just a quarter point cut, as you can see below.

Now, Powell has shown that he can be a bit tone-deaf on what the market wants. Given this, though unlikely, it’s still possible he could choose to hold rates steady in July. Given the 100% rate-cut expectation, doing so would likely result in a massive market sell-off.

Our money is on the rate-cut, but we’ll be watching with great interest. Most importantly will be the language Powell uses to hint at Fed actions as 2019 continues.

***What about your portfolio?

Let’s refocus on you now.

At this half-way mark in the year, where does your portfolio stand? Is it doing what you want?

It’s easy to look backward and play Monday Morning Quarterback, but only to the extent it helps you with the more important question of “how are you positioned looking forward?” One of the most effective ways to answer this is by doing a portfolio-audit — position by position.

As you do this, one of the best questions to begin with is “If I wasn’t invested in this company already, would it be worthy of my money today, given everything I know about the company, and its positioning within its sector and the market at large?”

In other words, start with a clean slate and look ahead.

It could be you made a great call buying a certain tech stock 18 months ago, based on its low valuation at the time. Well now, that tech stock might be up 75%, so it’s currently trading at a lofty valuation.

Your original thesis for the company played out … but what now?

Well, if the only reason you bought it was to take advantage of a low valuation, that would suggest it’s time for you to sell. On the other hand, if you don’t want to sell, then you need to come up with a new reason why it belongs in your portfolio going forward …

Is it worth holding onto because of a healthy dividend? Is the company investing heavily in a new growth area that could be supportive of even more gains? Is it about to buy a smaller company that will enable it to move into a new market?

What you don’t want to do is continue holding a stock “just because.” When it comes to investing, inertia is a huge problem for most of us.

Here’s one way to combat inertia that might be helpful.

Right now, open up your calendar. Find a 30-minute window (more time if you have it) and set up an appointment for “Portfolio Review.” When you make it official like this, you’re less likely to sweep this important exercise under the rug. Then when the time arrives, actually sit down, look at what you own, and decide whether you still want to own each of your positions today, given all that you know.

Even if you decide to continue holding all your current positions, you’ll move forward with a greater degree of confidence in your portfolio. And if you decide to sell? Well, good for you for weeding out something that didn’t belong.

As we wrap up, best wishes for an equally-profitable second half of 2019. As always, we’ll continue to keep you up to speed here in the Digest.

Have a good evening,

Jeff Remsburg

The post The Best First-Half in 2 Decades … What Now? appeared first on InvestorPlace.