Investors of all varieties received a generous Holiday gift from the markets in 2019 as almost all markets generated positive returns. US Stocks led the pack once again as the S&P 500 Index earned 31.5%. It was an interesting year where Bonds also performed well, which isn’t always the case. Key drivers of performance in 2019 included support from the Federal Reserve which reversed course by cutting interest rates to support growth in the US along with moderate earnings growth and easing Trade War tensions. The Trade War between the US and China is on a path to resolution, calming a significant theme of uncertainty. International Stocks also performed well, up 21.5%, with optimism that a calmer foreign trade environment should be helpful for foreign companies plus what appears to be a Brexit resolution. Finally, the positive economic and investment landscape led to the first US decade without a recession as we turn the clock forward into the 2020s.
The investment themes we are monitoring most closely in the New Year include a resolution to the US-China Trade War, global growth rates, and political tension during an election year. Trade War concerns were a primary driver of market volatility in both 2018 and 2019 but eased toward year-end as Phase 1 of a new trade deal was announced. The final details of the deal will become apparent in the next few weeks and will have a big impact on global growth. Earnings for S&P 500 stocks grew just 1% last year due in large part to uncertainty around global trade. Those concerns also put a damper on global economies which grew at just 2.6% last year. We will be watching earnings reports in the first half of the year as a key indicator of upside market opportunities in 2020, with particular emphasis on manufacturing and wages. It will also be important to monitor the US political environment as Presidential elections generally lead to increased market volatility. There are many reasons to expect that the economy and the markets can continue to do well in 2020 and beyond, although few investors predict a repeat of the strong market performance from last year.
For more information on investments and the markets this quarter and for the past year you can look at our Quarterly Market Review and Annual Market Review.
CONCLUSION
As always, we are here to listen to our clients and share our perspectives. We hope that our newsletter and articles provide you with inspiration and useful information. We encourage you to share our resources with family and friends who you think would benefit from them. Happy New Year!
