SO…by now we can breathe a sigh of relief.

December 2019 was thankfully, NOT a repeat of December 2018.  We made it through the end of the year with no significant bruising to market indicators.  As a matter of fact, 2019 was a pretty good year for all clients, and most investors.

In 2019, despite all the fearsome headlines, U.S. and Global Markets had a good year.  And now, U.S. and Global markets are continuing to hit new all-time highs.

Headlines this morning talked about DOW* 29,000!  The Nasdaq* composite has broken through 9,000.  STOXX 600 (Europe) just hit an all-time high.  And important, I believe, is that amount of negative yielding bonds have dropped by about a third on the world stage.

So now, while the public is thinking about higher highs, a (signed!) trade deal with China, and higher corporate earnings, let’s look ahead a bit.

We expect to see more volatility in our markets this year – with a highly polarized election on the way.  And with every new poll over the next several months we expect daily volatility.  Add to that trading costs for online trades have gone away and we believe the public will respond by over-trading due to no frictional costs (except taxes of course!) Despite the apparent positive for investors we’ve probably all heard that ‘free is not usually good’.  We shall see.

We see inflation continuing to be pushed on down the road, and rule #1 for most of Wall Street is DON’T FIGHT THE FED.  So we won’t fight the FED.  Tariffs are apparently having some minor effects on our U.S. corporation returns (unless you’re in the export business).  The tax reduction in the US has placed more spendable dollars in the hands of the public — resulting in more wealth and more saving and investing.  Somewhat higher interest rates are translating into good earnings for banks, as it should; finance is a big part of our markets.  And we’re seeing market indicators for developed international areas overtake US indicators.  With that in mind, perhaps it’s time for Emerging Markets to give us some juice for the new decade.  With these positives in mind:

We are optimistic, but not wildly so.  Our expectation is that we will see another strong year in 2020 for markets. However, that strength will likely not be in the range that we saw in 2019.

We’re looking forward to another ‘interesting year’.

Ron’s Market Minute – Historical Trivia

It’s true.  I really do keep a copy of the Stock Trader’s Almanac on my desk.  And I refer to it fairly regularly.  It often amazes me how many trends and tendencies seem to repeat year after year. (Wish they ALL did.  Wouldn’t that be nice?) 

The S&P 500 has advanced 100 quite a bit over the past three weeks.  Are you surprised?  I’m not.  It’s built into the history of the stock market.  Stock prices advance ahead of earnings season.  Let’s look at the annualized return of the S&P 500 since 1950 in the three weeks heading into the start of earnings season:

March 28th through April 18th (pre-Q1 earnings advance):  +21.81%
June 28th through July 18th:  +21.95%
September 28th through October 18th:  +12.05%
December 28th through January 18th:  +14.95%

Consider that the S&P 500 has produced average annual returns of roughly 9% over the past seven decades.  The pre-earnings advances above have each easily cleared that historical 9% level and the April and July pre-earnings advances have more than doubled that historical 9% annual return.  So the strong seasonal return was somewhat expected.

A bit more of an update- although stocks have been a bit mixed over the past two weeks, the bulk of the evidence continues to be bullish- in both the short and longer term timeframes.  The five largest sectors of the US S&P500* market all had new highs in the past couple of weeks (new highs are bullish).  Technology was the standout, but there is also strength in the industrials and healthcare sectors.  

However (you knew that was coming, didn’t you?) after a really strong month and some very recent strength, it would be reasonable to expect a bit of a pause.  Remember the ‘wall street waltz’ – two steps forward and one step back.  With that in mind, we’d like to see a bit of a pause to keep the public from becoming OVERLY bullish.  For now, we’re enjoying the gains. 

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk

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