Market action in both stocks and bonds during the fourth quarter suggests investors have shifted from pessimism to optimism about
the global economy—including the US.
Tug of War
While we’re delighted that the S&P 500 closed up 29% for 2019, we also realize this is an increase of just 10% from where the S&P was in late September of 2018. You’ll recall that in the fourth quarter of 2018, the S&P fell 20%, bottoming on Christmas Eve. So most of 2019’s gain was just digging out of that hole. Granted, a 10% price gain over 15 months is nothing to sniff at, but it’s not exactly a pop-the-champagne moment either.
We say this not to be churlish but to keep in perspective the tremendous volatility investors endured for the gains made over the past year and a quarter. That volatility resulted from the market being caught in a tug-of-war between a decent US economy—with low inflation, low unemployment, tepid but positive growth—and global stresses created by the erratic trade policy emanating from the White House.
Click here to read the full market outlook.