A look back at 2019, thus far…
Presented by Peter Livingston
The year in brief. 2019 brought three quarters of disagreement over trade issues between the U.S. and China… followed by fourth-quarter hints that a partial trade deal could be reached. Concerns grew over economic deceleration in America, and the Federal Reserve made three quarter-point interest rate cuts in a nod to that perception. Wall Street was fixated on trade and monetary policy for most of the year, and ultimately, investors saw more upside in equities than downside.
Domestic economic health. Trade negotiations between the U.S. and China ran hot and cold, breaking down in the summer as both nations announced more tariffs. Economic pressures encouraged new rounds of talks in the fall, and there was a positive result: in late October, U.S. officials announced that representatives of both countries had “made headway on specific issues” and were “close to finalizing some sections of [an] agreement.” In light of low inflation and slightly lower levels of economic activity, the Federal Reserve lowered the benchmark interest rate three times during the year, taking it down to a range of 1.50-1.75%.1,2
During the fall, economic indicators suggested an economy in decent or better shape. Personal spending, which accounts for the bulk of U.S. economic activity, was up 2.9% in the third quarter. Going into November, the unemployment rate was 3.5%, and it had not been above 4.0% for a year-and-a-half. Inflation was on the minds of Fed policymakers, but hardly on the minds of consumers: as of September, consumer prices had risen just 1.7% in a year. The most-recent gross domestic product reading (October 30) showed the economy growing at a 1.9% pace.3,4,5
Global economic health. The tariff dispute between China and the U.S. may have had a ripple effect on other economies, as analysts saw growth slowing abroad. The United Kingdom was given extensions to complete its Brexit from the European Union; the Brexit deadline is now January 31. The European Central Bank took interest rates to historic lows and said that it would keep them there unless inflation pressure mounted. It also restarted its bond-purchase program.6,7
World markets. In the end, 2019 may be remembered as a bullish year for stocks worldwide. Through Halloween, three stock benchmarks outside the U.S. were up more than 20% on the year (Germany’s DAX, France’s CAC 40, Brazil’s Bovespa), and three others were up between 10-20% (China’s Shanghai Composite, Japan’s Nikkei 225, Australia’s All Ordinaries). The MSCI EAFE index, a gauge of performance in developed foreign stock markets, was up more than 13%.8,9
Commodities markets. As October ended, the year-to-date advance for palladium stood out: the precious metal had gained more than 56% so far in 2019. Gold was up 14% for the year; silver, up more than 12%. West Texas Intermediate crude oil, the U.S. benchmark, had gained almost 14% YTD. Natural gas was down more than 8% for the year. The U.S. Dollar Index had advanced nearly 3.5% YTD.10
Real estate. The National Association of Realtors reported a 3.9% annualized gain for existing home sales across the 12 months ending in September; the Census Bureau said that new home buying was up 15.5% over the same timeframe. Relatively low borrowing costs may have influenced these improvements. The NAR said that the median existing home price had risen to $272,100, 5.9% across the year ending in September.11,12,13
Looking back, looking forward. If current trends continue, 2019 may go down in the history books as a great year for investors. Through late October, the Standard and Poor’s 500 was up more than 20% year-to-date; bonds, nearly 10% YTD; oil and gold, well above 10% YTD. While 2019 did put a “wall of worry” in front of Wall Street, it was no great obstacle for much of the year.14
Peter Livingston may be reached at (704) 658-9190 or peter.livingston@lpl.com.
Peterlivingston.com
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Citations.
1 - cnbc.com/2019/10/28/us-china-trade-analysts-dont-expect-more-than-phase-one-deal-in-2019.html [10/28/19]
2 - marketwatch.com/story/fomc-cuts-interest-rates-14-point-but-fed-also-signals-pause-2019-10-30 [10/30/19]
3 - marketwatch.com/story/gdp-slows-slightly-to-19-in-the-third-quarter-2019-10-30 [10/31/19]
4 - investing.com/economic-calendar/unemployment-rate-300 [10/31/19]
5 - investing.com/economic-calendar/ [10/31/19]
6 - cnbc.com/2019/10/28/the-eu-discusses-three-month-brexit-extension.html [10/28/19]
7 - cnbc.com/2019/10/24/ecb-keeps-rates-unchanged-as-mario-draghi-says-goodbye-to-frankfurt.html [10/24/19]
8 - barchart.com/stocks/indices/world-indices?viewName=performance [10/31/19]
9 - msci.com/end-of-day-data-search [10/31/19]
10 - barchart.com/futures/major-commodities?viewName=performance&timeFrame=daily [10/31/19]
11 - ycharts.com/indicators/us_existing_home_sales [10/29/19]
12 - ycharts.com/indicators/new_homes_sold_in_the_us [10/29/19]
13 - reuters.com/article/us-usa-economy-housing/u-s-existing-home-sales-drop-more-then-expected-in-september-idUSKBN1X11OQ [10/22/19]
14 - cnbc.com/2019/10/24/2019-is-shaping-up-to-be-one-of-the-best-years-ever-for-investing.html [10/24/19]