Seeking Alpha

Market Wraps Up Record Year

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Includes: SP500
by: Michael Loewengart
Michael Loewengart
Long-term horizon, portfolio strategy
Summary

US equities rallied to new highs through year-end, with the S&P 500® posting its best annual performance since 2013 and the Nasdaq Composite hitting 9,000 for the first time ever.

International equities led monthly equity returns, aided by accommodative policy from the European Central Bank and perhaps value-hunting after lagging US equities considerably in 2019.

Fixed income sectors were mixed for the month.

December capped off an exceptionally strong year for the markets. Bulls forged on, driving equities to record high after record high, while the bond market posted its best year since 2002.

The Fed, after stepping in to ease rates three times in the midst of recession murmurs earlier this year, hit pause in their last meeting for 2019. Meanwhile, the US economy continued to hum along with a jobs report that trounced expectations, unemployment at a 50-year low, solid industrial production, and rebounding retail sales.

Impeachment proceedings and US-China trade progress dominated headlines last month. While markets essentially ignored the House’s vote to impeach President Donald Trump, they warmly embraced news of a Phase One deal between the two world powerhouses.

US equities

US equities rallied to new highs through year-end, with the S&P 500® posting its best annual performance since 2013 and the Nasdaq Composite hitting 9,000 for the first time ever. Growth equities beat value for the month and trounced them for the calendar year.

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Energy and information technology led sector performance. Energy gained amid an improved outlook for oil demand while IT picked up steam on indications that the Phase One US-China trade deal will likely be signed in early 2020.

FactSet Research Systems


International equities

International equities led monthly equity returns, aided by accommodative policy from the European Central Bank and perhaps value-hunting after lagging US equities considerably in 2019. Emerging markets outperformed developed markets last month, with the Latin American region turning in the strongest performance.

FactSet Research Systems


Fixed income

Fixed income sectors were mixed for the month. Corporate bonds were positive, led by high yield, while most treasuries were softer as longer-term interest rates rose.

FactSet Research Systems


Market factors in 2020

2019 was one for the record books, and although the market has yet to show signs of slowing down, performance like last year’s would be hard to repeat. As we look ahead to a new year, here are five developments we’ll be watching:

  1. Impeachment and the November election. It’s hard not to get caught up in impeachment headlines, especially during an election year. Investors should keep in mind that many factors will ultimately play into market performance, and neither impeachment nor the election should be a primary focus for long-term investing goals.
  2. Trade negotiations between the US and China. As we saw repeatedly this year, trade headlines can move the markets. While equities surged on recent Phase One news, what Phase Two may look like—if and when it happens—is an open question. And don’t rule out the possibility that things go backwards, and additional tariffs are levied.
  3. Monetary policy and the hunt for yield. With the Fed likely to remain in wait-and-see mode this year, we expect investors will be on the hunt for yield opportunities. But be wary of chasing income in the riskiest parts of the market and remember that a stock’s potential to grow earnings and dividends is crucial in this type of late-stage economy.
  4. Brexit implications. While Boris Johnson’s sweeping win in the British general election provided clarity on the Brexit timeline, it hasn’t erased the uncertainties and potential risks that may arise as longstanding political and trade relationships shift across the globe.
  5. Moderated economic growth. With global growth predicted to continue slowing, having a basket of diversified investments will be paramount. Back-to-back blockbuster years like 2019 are not common and diversification remains a tried and true strategy for weathering market highs and lows.

Bottom line: The market is nothing if not unpredictable. The start of a new year brings with it the opportunity to take a fresh look at your portfolio, your risk tolerance, and your long-term investing goals.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.