It is hard to believe but fifty years have passed since the “miracle” Year of 1969 and particularly, the summer of that year. Here is some nostalgia and investment thoughts.
In June, the Stonewall riots took place in New York City. That was considered the beginning of the modern gay rights movement in the US.
On July 20, Apollo 11 landed on the moon and soon thereafter Nel Armstrong took the first human step on the moon. That followed another aviation first, the initial flight of the Boeing (BA) 747 in February. Later that year, the 747 flew its first commercial flight.
Also, in July, two days before the lunar landing, the Chappaquiddick incident in which Teddy Kennedy killed Mary Jo Kopechne when driving his car off a bridge took place. Following that incident came another famous Kennedy family cover-up.
July 1969 was also when my youngest brother was born.
From August 15 – 18 the epic Woodstock music festival was held
In sports, it was a magical year for New York. On January 12, Broadway Joe Namath led the underdog New York Jets of the AFL to a surprise victory over the Baltimore Colts. That victory was the genesis of the AFL-NFL merger. The Miracle Mets won the World Series in October [Special shout out to my friend Martin who was at the game. Coincidentally, his cousin Ed, who wrote a book on Cleon Jones that year, grew up in the same apartment building as yours truly in Brooklyn, though we did not learn of that familial relation till a few years ago]. The New York Knicks began their march toward an NBA title in 1970.
Since then, the Knicks have won one NBA title (1973); the Mets one World Series (1986) and the Jets are still wandering in the gridiron wilderness seeking a second Super Bowl victory.
Here is some interesting baseball trivia. Davey Johnson was the last batter in the 1969 World Series. In 1986 he was the manager for the Mets when they took the World Series from the Boston Red Sox. Jerry Koosman pitched a complete game in that Game 5 clincher. Of course, that was when complete games were commonplace and relief pitchers were washed up old veterans rather than the specialists that they are today.
Speaking of Brooklyn and the Knicks, how inept is Knick ownership? I will let Stephen A. Smith (my favorite sports commentator) tell you. It is so hard to be a Knicks fan. Maybe we can get Willis Reed, Clyde Frazier and Bill Bradley back on the court. I have a Clyde Frazier signed basketball just to the right of my desk.
During the early stages of a prolonged bear market, which would end in 1982, the Standard & Poor’s 500 (SPX) closed at 99.58 on June 28, 1969. Fifty years later, the index closed at near a new all-time high of 2,941.76. That is a total return of 2,854% and an annual compounded return of 7.01%. Adding dividends, the annual compounded return would be close to 10%. It would not be until 1980 that the SPX would sustainably rise above the level of June 30, 1969. Such an eleven-year stock market coma makes the fifty year annual compounded return all that more astonishing.
Fifty years ago, Digital Equipment was, along with International Business Machines (IBM), leaders in technology. That was before the VAX and desktop computing. DigiEq no longer exists. IBM has had to reinvent itself twice since 1969. The NASA projects of the 1960s were seeds for today’s technological innovations – semiconductors, computers and eventually the internet.
Trust me when I tell you that over the next fifty years investments in the stock market and technological innovation will continue to pay off handsomely. My guess is that scientific technology will provide leadership in the future.
In My Gut Feeling for 2019, I stated: “I am going to play it safe and use a PE ratio of 17, arriving at a year-end SPX price target of 2,975, an all-time high. Along the way the SPX will hit a low of 2,450 and high of 3,100.”
Well, we put in a low of 2,444.05 in the first half of 2019 and the markets continue to make new highs. SPX 3,100 is comfortably within reach (by 5.4%) of the June 30 level. Having a second half move of 5.4% is certainly reasonable and welcome.
While those prognostications were static given earnings data and interest rates available six months ago, I always leave the door open for mid-year adjustment as the economy and FOMC policy progressed.
While the FOMC made a big mistake in last year’s fourth quarter, I am not certain that it is necessary to lower interest rates due to a faltering US economy. However, it may be necessary to do so given weak economies in Europe and parts of the rest of the world (ROW); preventing the US Dollar from getting too strong and hurting our exports. So, I now expect one FOMC ¼% rate cut by year end. I will still play it safe but will nudge up my year-end SPX price target to 3,150.
President Trump will continue his successful bi-lateral trade negotiation strategy of divide and conquer. First it was South Korea and then North America, China is learning its lesson to no longer treat the US like a bunch of economic patsies. Europe, which is a mess politically and economically will be Pres. Trump’s next target. Given the fragmentation in Europe with Brexit and other matters, the US will come out for the better with those negotiations.
The real global wildcard is Iran. Iran has already exceeded its nuclear enrichment limits set by the 2015 deal it struck with the US and ROW. Clearly President Trump was correct in saying that it was the worst deal ever. As we can see, he was correct as Iran did not hold up its end of the bargain. Pulling out of that deal was a sign of strength and commitment to our Israeli allies. Even MSNBC, no friend or fan of Pres. Trump, agrees. Despite Iran attempting to spark an international military confrontation, President Trump will continue to fight back with economic not military weapons. Should however, Iran attack an American naval vessel or military installation, and if American life is lost, then the President might be forced to, and will receive bipartisan and international support to retaliate militarily. If so, an immediate but not permanent 7 – 10% market correction could ensue.
Finally, as you travel the roads of this great country this summer, do so safely while playing my stock market travel game. When you see a license plate, try to guess what stock symbol is represented. For example, a license plate of JNJ250 would be Johnson & Johnson (JNJ).
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long BA, SSO & SPXL – although positions can change at any time.
Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, a registered investment advisor specializing in high net worth private wealth management. For more information on investing with LakeView Asset Management, LLC call us at 888-9LAKEVIEW or request more information by clicking on the contact button on the top right-hand corner of the website. LakeView Management, LLC is a Nevada LLC, with its principal office located in Henderson, NV and branch office located in Millburn, NJ
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