Market Update 12.31.2019

Scott Campbell |

The U.S. stock market was up 8.99% in the fourth quarter of 2019 and up 31.22% for the year.  2019 was an incredible year in the market.  All investment types performed very well. Market volatility flattened during the fourth quarter as stock prices roared higher.  The Federal Reserve’s reduction in interest rates and progress with a phase one deal with China provided the fuel for the strong fourth quarter.

Remember all the talk last year about the impending recession.  The media was nonstop with proclamations and announcements of the coming recession.  It wasn’t a matter of if a recession would occur, but rather how bad it would get.  

All along there was no statistical evidence that a recession was coming.  The data showed that the economy was late, full cycle in a long-term, bull market and showing signs of slowing, which is a part of the natural economic cycle.  The data is now showing the economy is rebounding from the minor slowdown late last year. 

The employment situation is as strong as ever.  Unemployment is hitting a 50-year low.  And that drives consumer spending which is the main driver of the U.S. economy.  If everyone has a job, and isn’t worried about losing that job, they spend more freely.  Average wages are finally starting to grow again. 

The global economy remains sluggish but is showing signs that conditions are no longer deteriorating.  The global business cycle showed evidence of improvement in some areas.  Emerging markets and non-U.S. small cap equities performed very well in the fourth quarter and led the best returns for global stocks in several years.

The U.S. market appears to be poised to continue to perform well.  Earnings season just started and the news is mostly good.  The economy is performing well.  The Fed is keeping interest rates low.  Negative yields overseas are bringing more investment dollars to the U.S. market.  But, as is always the case nowadays, market volatility can return at any time.  I would expect volatility to return in the summer as the election approaches.

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