Here is our 4th Quarter Stock Market Recap and 2020 Outlook. We discuss the difference between 12 month and 15 month market performance, stock market valuations, the market showing resiliency in the face of many recessionary signals that flashed in 2019, and more. Also don't miss our possible 2020 S&P 500 price targets!

1. Asset
Management
Q4 Market Recap
and
2020 Outlook

2. 1
2019 was definitely a year for the record books! However, if you go back 15 months
instead of just looking at year to date numbers, the returns look very different. We are
not far removed from one of the worst quarters we’ve seen in a while (4th quarter of
2018). It took us until October 2019 to finally break out past the highs that were put in
before the 2018 Q4 sell-off. But we are excited about how strong the market rallied once
it finally broke out. It held above a resistance level that gave the market trouble for the
past 2 years, all while amassing 34 record all-time high closes in 2019!
What a Difference a year can make!
The market essentially put in a‘lock-out’rally from the 1st of the year. A lock-out rally is
one where the market doesn’t back test the lows, so buyers who were waiting for the
usual back test never got another entry point, therefore investors were ultimately‘locked
out’. A big catalyst to the market rally was the Fed adjusting their policy from raising
rates in 2018 to cutting rates in 2019. Another bridge of support from the Fed was the
injection of 100’s of billions of dollars into the Repo markets* in the fourth quarter of
2019. The Fed plans to continue the Repo strategy well into January and has already
stated that they are not intending to change interest rates in 2020. Another key compo-
nent of the 2019 market rally was the continuous optimism that a trade deal with China
was on the horizon. The market used this confidence dozens of times to ramp higher, but
a trade deal still hasn’t been established to this day. Even though the‘Phase 1’deal has
been agreed upon verbally by both sides, it’s important to note that there hasn’t been
any deal in writing, although reports point to a written deal being finalized as early as
the first week of January 2020.
Our Thoughts on Market Valuations
Markets are still on the high end of long-term valuations at almost double the historical
norm. This is something we like to pay very close attention to; however, it doesn’t mean
that the market can’t continue to proceed higher. Valuations can remain elevated for
years as we saw in the late 90’s. Also, an argument can be made that this may not be
nearly as important as it was in the past because of the amount of additional money that
has been injected into the market by central banks from around the world. Since 2007,
major central bank assets have grown from around 5 trillion dollars to almost 20 trillion
dollars globally. Perhaps the new norm is a much higher Case Shiller PE ratio** moving
forward. We will certainly continue to monitor this every step of the way, and we still
believe these readings hold valuable information.
Markets Shrug Off Recessionary Fears
One of the biggest stories of 2019 was the inversion of the yield curve, which historically
has spelled significant trouble for the markets. The yield curve became inverted at the
end of March 2019, then returned back to normal mid-October.

3. 2
Throughout the year we got ominous readings just like the yield curve inverting, includ-
ing major breadth divergences known as‘Hindenburg Omens’. A Hindenburg Omen is a
technical indicator that attempts to predict an increased probability of a stock market
crash.This Hindenburg model predicts this by measuring companies that are making
52-week highs, as well as 52-week lows, all while the market is at or near all-time high
levels. Although these various warnings flashed in 2019, none of the indicators seemed
to matter to investors. It’s important to note these indicators tend to forecast recessions
a year out, but all signs are pointing towards false readings so far!
Technical Analysis and 2020 Outlook
Towards the end of 2019, the market finally broke out of a range that it had been trading
in since the end of 2016. When analyzing the market from this perspective, this would
put our first fib retrace level*** upside target at 3700, with the next target level over
4000. If what we are seeing is truly a major multi-year breakout, we would expect to see
the breakout level (approximately 3030) back tested. Ultimately, the market would not
go below that level and then would continue higher. This would be our expectation,
unless 2020 starts out the same as 2019 with a major lock-out rally. Lock-out rallies, like
we witnessed last year, are some of the most powerful moves that markets can make.
Possible Concerns for 2020
In 2020, the major areas for concern include political upheaval in the upcoming election,
trade war escalation, the Fed no longer being accommodative (as it was in 2019), and the
current conflict between the US and Iran. From a technical and fundamental standpoint,
if the market can avoid these landmines, then it looks like we could be in for another
promising year. As always, we will focus on mitigating risks while seeking to provide
upside opportunities.
-The Team at Perspective Wealth Planning
The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks
LLC and should not be construed directly or indirectly as an offer to buy or sell any secu-
rities mentioned herein. Due to volatility within the markets mentioned, opinions are
subject to change with or without notice. Information is based on sources believed to be
reliable; however, their accuracy or completeness cannot be guaranteed. Past perfor-
mance does not guarantee future results. Investors cannot invest directly in indexes. The
performance of any index is not indicative of the performance of any investment and
does not take into account the effects of inflation and the fees and expenses associated
with investing.
Registered Representative offering securities and advisory services through Cetera Advi-
sor Networks LLC. Member FINRA/SIPC a broker/dealer and a Registered Investment
Advisor. Cetera is under separate ownership from other named entities.

4. Perspective Wealth Planning
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Johnstown, PA 15904
(814) 580-9881
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