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2019.01.13 Penn Wealth Report Vol 7 Issue 01

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Penn Wealth Publishing Subscription Information https://www.pennwealthreport.com Penn Wealth Publishing 9393 West 110th Street 51 Corporate Woods Suite 500 Overland Park, KS 66210 4 penn wealth Report volume 7 issue 01 13 Jan 2019 Penn Wealth Report Copyright 2019. All Rights Reserved. From the Editor/ Nothing personal to Jerome Powell, but we have seen enough of the Fed chief for awhile. Actually, it is not his fault as much as it is the emotionally-driven financial news networks. Within the past month, we have been forced to watch live speeches and question-and-answer sessions by a guy who is supposed to be quietly and methodically massaging monetary policy behind the scenes. e Fed's job is to help prevent run- away inflation and keep the right amount of grease on the skids of our financial institutions, not serve as a motivational speaker for investors. But the networks couldn't help themselves—they had to carry the most mundane events live, with the market's instant reaction on the chyron. I found myself saying, "C'mon Jay, just don't give them any crumbs to misconstrue and force another 700-point drop. It really has been utter nonsense. We need to be paying attention to earnings reports and the health of the domestic and global economies, not the rate at which the Fed is going to reduce its balance sheet each month. e 10-year Treasury is sitting at 2.704% for Pete's sake, not 8%. Nothing the Fed can do with rates this low should rattle the stock market. Yet here we are. As for our outlook on 2019, we have actually become more bullish thanks to the great pressure relief of the last quar- ter of 2018. We certainly haven't heard about an "overheated" market recently. PE ratios have fallen to reasonable levels, and the Chinese need to make a deal on trade. Our biggest concern going into the year revolved around the ugly political battles which will fill the headlines on too many days, and that remains the case. It used to be safe to say that one in every four years would bring us negative returns on the Dow, the S&P 500, and the NASDAQ. While old paradigms are often meaningless, we just had that negative year. On our Market Pulse page, we predicted an S&P 500 in the 2,800-2,900 range by year-end, and we are sticking by that call. at would represent a 12-15% return for 2019. But it won't be smooth sailing on our twelve-month jour- ney, and investor confidence won't be where it was in 2017. Furthermore, some of the biggest losers of recent years will take the year by storm. For example, we have moved from under- weight to overweight on areas such as emerging markets and gold. And, with the Fed about done with its quantitative tight- ening (QT), it will be safe to get back into some bond funds we have been avoiding. In short, we expect it to be a good year for hands-on investors. In other words, shun the plain vanilla index funds and make specific bets on some former dogs—that bold action should pay off nicely. MSH Michael S. Hazell editor-in-chief Just when everyone was ready to call the bear, the markets roar back 2019 is going to be a fun year. It will take skilled investment action, based on an accurate reading of the past and a pretty good sense of what will unfold domestically, to notch some nice portfolio gains.

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