Dear Client,

Our previous quarterly newsletter written at year end was titled “Welcome to the new reality”, coming hot off the heels of a swooning stock market that cut a quick 20% off the major averages from late September through Christmas Eve.  We discussed four reasons why the environment had changed, from rising interest rates to wage inflation to a change in investor sentiment.  This newsletter could aptly be titled “Spring has sprung” as the stock market has recovered in a “V” formation and is right back up to the levels last witnessed at the high on September 20.  I am sure a lot of you are wondering “what the heck is going on here”.  In our last newsletter we explained how investor sentiment had changed, i.e. not feeling so sure and confident about the market’s future prospects.  It now seems investors are once again throwing caution to the wind.  How fickle they can be.

Our job here at GSB Wealth Management is to cut through all the noise and mis-information we hear in the press and on television every minute of every day and focus on the underlying economic fundamentals.  After cutting through the fog, things in the economics department are looking pretty good.  Let us explain.  One issue we have discussed at length in prior letters is the fact that we are now over 10 years into a stock market recovery that took hold in March 2009, logging a cumulative gain of over 400%, one of the longest and strongest recoveries on record.  The economy has been growing for 10 years straight as well, also one of the longest expansions on record.  One would naturally think we should be nearing the end, poised to fall back into economic recession and a falling stock market.  Not so fast.  The 2009 recession and stock market crash was one of the severest on record, eclipsing anything since 1929 and the few years after that.  Anybody with a house and common stock portfolio or a 401K suffered severe losses, prompting some to call their retirement plan a 201K as the account had been cut in half.  The psychological damage inflicted during that time was severe.  We still run into folks that are still scared, even after a 400% gain in the stock market, looking over their shoulder wondering if another crash is right around the corner.  Many of us remember all the iconic U.S. companies that were taken to their knees in 2009.  Many went bankrupt or had to be bailed out by the U.S. Government, including all the American automakers other than Ford and most of our largest financial institutions.   The emotional scars from that period put a long lasting, if not permanent (at least for this generation) dent in what we refer as “animal instinct”, or the inherent behavior to act aggressively and take risks.  With animal instincts pretty much quashed in the last recession, economic growth was far more subdued coming out the other side than was usual in past recessions.  It was as if folks would rather curl up and hide under a tarp than seize that next attractive business opportunity.

So here we are today, still in a growing economy with low interest rates, low inflation, growing corporate earnings, yet lacking “animal instincts” or undue risk taking that often presages the next downturn.   China’s economy shows evidence of picking up speed and oil prices are slowly creeping upward suggesting somewhat robust global growth.   The aforementioned discussion may well act to prolong The U.S. economic expansion above and beyond anything we have experienced in recent memory.  Technological innovation has acted globally to hold inflation in check.  The U.S. is now energy self-sufficient, something that was only dreamed of just a few short years ago.  The unemployment rate is at a decades low, yet labor force participation is well below prior peaks and this is pulling former retirees and those that were under employed back into the work force.  There are cross currents everywhere, which leads to the old adage “today is always the hardest time to invest”.  Our dogmatic adherence to only the highest quality investments is of great value in times like these.

And in other news:

We are very happy to welcome Will Patterson and Patrick Morris to the team.  Will brings with him many years of experience working with clients in the fields of portfolio management and planning and joins us as a Vice President.  Patrick Morris joins us from Guilford Savings Bank and will be our Office Manager and working with clients.  We also note that Connor Dolan is no longer with us and we wish him the best in his future endeavors.

We are always happy to hear from you should you have any questions or concerns.  Until then we hope 2019 continues to be a prosperous and healthy year.


Your GSB Wealth Management team



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