Hello all – we hope you had a nice December and 2019!
Stocks saw another record-setting month, with the year ending just off record highs. The S&P 500 and the Nasdaq both had their best years since 2013 while the Dow had its best year since 2017.
Here’s a look at the three major indexes for 2019:
Stocks saw another record-setting month, with the year ending just off record highs. The S&P 500 and the Nasdaq both had their best years since 2013 while the Dow had its best year since 2017.
Here’s a look at the three major indexes for 2019:
Here’s a little more granular look at the S&P 500, showing the index over the past year, the performance of every day, and performance by the day of the week. If anything, it shows us we can safely take Monday’s off from now on…
Also, this year had the highest percentage of ‘up’ days in the market since 1996, showing just how strong the market was.
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Getting back to December, what was behind the gains this month?
There are probably a few things we can point to. One is just the fact that it’s December – the last month of the year has historically been one of the best and least-volatile months of the year. A lot of new money coming in and chasing top performing stocks tends to boost the market.
Another factor is the Fed. They recently restarted a stimulus program that ended in 2014 where they printed money to juice the markets. They say the reason for the latest round of stimulus is not to juice the market but to stabilize it. Either way, the effect is still the same and stocks have gone up.
There are probably a few things we can point to. One is just the fact that it’s December – the last month of the year has historically been one of the best and least-volatile months of the year. A lot of new money coming in and chasing top performing stocks tends to boost the market.
Another factor is the Fed. They recently restarted a stimulus program that ended in 2014 where they printed money to juice the markets. They say the reason for the latest round of stimulus is not to juice the market but to stabilize it. Either way, the effect is still the same and stocks have gone up.
The China trade war was another factor in the market performance this month where a “Phase 1” agreement was officially announced (it was un-officially announced weeks earlier). We still don’t know exactly what is in the deal, but a de-escalation in tensions was welcomed by the markets.
Lastly, the market has been helped by decent economic data, with consumer data looking particularly strong.
Recent manufacturing data hasn’t been great, but it may be starting to turn the corner.
Recent manufacturing data hasn’t been great, but it may be starting to turn the corner.
Employment remains solid:
Sentiment surveys haven’t changed much, but remain at a high level:
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Where does the market go from here?
The market is definitely overbought (or expensive) at its current level. But it’s been overbought for some time and has continued to push higher. We don’t see any of the signs that a significant pullback is near, but wouldn’t be surprised to at least see a pause.
One indicator to keep an eye on is market breadth, which compares the amount of stocks rising vs. falling. It has been very strong recently and remains so, signaling a healthy rise in the market. Any change showing fewer stocks advancing would be a sign to be more cautious. We’re not at that point yet, but it is one of the red flags to watch for.
As always, unpredictable events like comments from government officials on the trade war or from the Fed have the ability to push the market either way, so some caution is warranted.
This commentary is for informational purposes and is not investment advice, an indicator of future performance, a solicitation, an offer to buy or sell, or a recommendation for any security. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing. Past performance cannot guarantee results.
