2019, What a year it’s been. This year is nearly over and investors must be relieved. Many thought we will get into a global recession. Happily, that recession just didn’t happen. And we are into the year-end.
It is said, ‘We manage what we measure.’ Isn’t the typical year-end time of reflecting and taking stock? At this juncture, it’s good to ask how was the year 2019 for my investments?
2019 – The Year saw headlines dominated by Global – US-China Trade war talks, uncertainty, Global growth slowing down, Recession Fears, India – Modi Government 2nd term, NBFC troubles, Slowdown in credit growth, The investment portfolios spread across the spectrum of the large, mid and small-cap had very divergent performances, the index (Nifty/Sensex) moved up with a narrow rally of just 10-12 stocks, the rest of the broader market underperformed significantly.
The economy is not made up of just these 10-12 companies. The broader market will improve once the credit growth and demand picks up.
The recent years saw significant reforms like GST, New Bankruptcy code and a massive 10% reduction in Corporate Tax rates.
The economy is undergoing a major structural adjustment from an informal to the formal economy with all these implementations. This adjustment in the near term takes time. However, these reforms are done for stronger and sustainable growth in the longer term.
In our view, year 2020 will see the economy in a recovery stage with more reforms such as divestment of public sector companies, land and labor reforms.
The Reserve Bank of India like any other central bank across emerging markets, has almost cut interest rates by 1.4% in the year 2019. In general, when interest rates are low, the economy grows. As interest rates are reduced, more people can borrow more money. The result is that consumers have more money to spend, causing the economy to grow.
With this backstage, we hope to see better stability and growth in equity markets in 2020.
Staying Invested
We believe the investment journey is about being invested. See what the benefits of being invested in the following links are. The longer your investment horizon, the better off you are in equities.
We have over the last 15 years seen clients reaching their goals who stayed invested and avoided short-term decisions that could have taken them off course.
Investors may make suboptimal decisions when emotions take over, tending to invest out of excitement when the market is going up and sell out of fear when the market is falling.
Markets do ultimately normalize, and when they do, those who stay invested may benefit more than those who don’t.
Investing during bad economic conditions has always paid. During our journey, we have seen such conditions in 2008, 2013 — those who stayed, the market rewarded. We are at the same juncture in 2019.
We wish you and your family a Happy & Prosperous New Year.