Gill Capital Partners November 2019 Market Commentary

First and foremost, we would like to wish all of our clients, friends, and partners a very happy Thanksgiving. We are thankful for the privilege of working with each and every one of you.

What are we talking about at Gill Capital Partners?

Our Investment Committee meets regularly to review portfolio allocations, macro-economic events and our investment managers. Below are some areas that are currently top of mind within the Committee.

 New stock market highs – More to come?

Investors are feeling particularly thankful this year with domestic equity markets on pace for their best year since 2013. In fact, most major U.S. equity markets are sitting at fresh all-time highs. While international equities have had a good year, they have lagged their U.S. counterparts, and have quite a ways to go before regaining all-time highs.

 Our View:

Equity markets have disregarded the deluge of negative headlines and heightened geo-political risk thus far in 2019 and pushed to new all-time highs. Below are a few areas that we are watching.

Valuations – Even though U.S. equity markets are at or near all-time highs, valuations remain reasonable. The chart below shows the P/E ratio of the S&P 500 going back 25+ years, and at its current level of 17x, it is just barely above its long term average of 16.2x. While stocks may not be a screaming bargain like they were in 2008, they are not wildly overvalued, either.

Earnings – Third quarter earnings have been stable, with the majority of companies having reported. The blended average revenue growth rate for all 500 companies within the S&P 500 was up 3.8% in the third quarter, with earnings coming in flat to slightly negative. This was largely in line with estimates, though 75% of companies delivered slight positive surprises. While these earnings numbers may not seem overly exciting, the majority of businesses continue to beat expectations and increase revenue, albeit modestly. The steady earnings picture is continuing to support equity price valuations.

 Interest Rates – It appears that low interest rates are here to stay, at least for a while, and that is good news for equity investors. With interest rates hovering at or near cycle lows and the Federal Reserve back in a more accommodative posture, investors once again have the Federal Reserve on their side.

 While the fundamental backdrop continues to be a positive one for equity market investors, we remain vigilant and cognizant of where we are in the cycle: 10 years into a bull market. As we move into 2020, we have adopted a slightly more conservative posture than we’ve had the last few years, though not overly conservative, as fundamentals still remain positive. We are moving into a seasonally positive time for the markets, which are generally supported by strong holiday spending. Most analysts are calling for another strong holiday sales season this year, which could continue to support the equity markets into the new year.

 2019 Annual Toy Drive

Gill Capital Partners is again joining with the Santa Claus Shop to deliver toys to children this holiday season by hosting our third annual toy drive. We try to be very thoughtful of how we spend our time and money, both as a company and as individuals, and strongly believe in supporting the needs of our community. Should you wish to support our toy drive, please feel free to drop off any new or gently loved toys at our office. We will be collecting toys until December 11th. 

Thank you in advance for helping Gill Capital Partners “give back.” 

As always, please let us know if you have any question or concerns, or if we can provide assistance with any other financial planning matters including education, taxes, insurance or estate needs.