| Index | 2019 Return |
| CRSP US Total Market Index | 30.84% |
| FTSE All-World Ex-US Index | 21.81% |
| BloomBarc US 5-10 Year Credit Index | 13.90% |
The index returns above are a snapshot of the robust returns for financial assets in 2019. These returns were buoyed in the second half of the year with the reversal of two investment headwinds: interest rates and trade. The Federal Reserve lowered the Fed Funds rate by 0.75% while the U.S. and China made progress in their tenuous trade dispute. The gains in the equity market averages were accompanied by lackluster 3.5%* earnings growth. As a result, market valuations appear stretched. Entering 2020 the Case Shiller P/E ratio is 31.19, a level of valuation exceeded only in 1929 and 1999.
Despite stretched valuations we remain fully invested.
We understand the inherent risk at lofty valuation levels, however, we are confident in our proprietary model-based approach that focuses our research efforts on relative value and improving or deteriorating trends within market sectors, industries and individual companies. This approach informs our stock selection process, highlighting opportunities even as overall valuation levels are perhaps unsavory. Thus, we are able to maintain a fully invested, diversified portfolio, at a discount to the overall market that we believe is well positioned for the current environment.
While we don’t know how long this rally will continue, we will ensure that our portfolios will participate by being fully invested, yet always diligent in looking for opportunities to improve our holdings.