WASHINGTON (Reuters) - The U.S. economy will grow at a “solid” rate of 2.2% this year, the non-partisan Congressional Budget Office forecast on Tuesday, but the federal budget deficit will hit $1.02 trillion.
The economy will be strong during this presidential election year, thanks in part to consumer spending, CBO said, but it forecast “higher inflation and interest rates after a decade in which both remained low, on average.”
Economic growth will slow to an average annual rate of 1.7% from 2021 to 2030, CBO predicted, while inflation and interest rate increases will slow in 2023.
After topping $1 trillion in fiscal 2020, federal deficits will average $1.3 trillion per year between 2021 and 2030, CBO estimates, a level that some economists and policymakers warn is unsustainable.
Washington’s budget deficit hit a peak of $1.4 trillion in fiscal 2009, after emergency measures to contain a severe economic recession that began two years earlier.
It hasn’t topped $1 trillion since 2012 and fell to $585 billion at the end of President Barack Obama’s second term in 2016.
The current and forecast deficits come under better economic circumstances, but after a Republican overhaul of the tax system, which reduced revenues over the short term. Federal outlays in 2020 will be $4.6 trillion, while revenues will hit $3.6 trillion, CBO estimates.
CBO projections assume that current laws governing taxes and spending will generally remain unchanged.
Under the current system, budget deficits will push overall U.S. federal debt held by the public to $31.4 trillion by the end of 2030, CBO estimated.
That would be 98% of gross domestic product, or the total monetary value of all goods and services produced in the United States. That’s a higher rate than at any point since just after World War II, CBO said, and “more than double what it has averaged over the past 50 years.”
Interest payments on federal debt, coupled with increased spending on mandatory federal programs like Social Security, will be the biggest contributors to climbing federal outlays in coming decades, the CBO said.
As a result, U.S. federal spending will grow more than revenues through 2050, CBO estimates.
Tuesday, January 28, 2020
Friday, January 17, 2020
longest bull market
With the most recent SPX high on Thursday (1/16), below is an update of the table illustrating how this bull market compares to others in the post WW II era. At 3,964 days in duration, it is now 513 days longer than the internet bull market, but at +390%, it remains second highest with regard to the percentage increase. The SPX would need to reach a level of about 3,500 to exceed the 417% gain of the strongest bull market in history. This would only be a 2020 YTD gain of about +8.5% if it happened by the end of 2020.
With about 10 months still to go in his first term, President Trump has moved solidly into 4th place overall for market performance in the post WW II era (surpassing Bush #41 last week). As of Thursday (1/16) the SPX is +55.0% since Election Day 2016. It’s a long road to the next position (Clinton +70.1%) but it is not unrealistic to think the SPX could reach 3,641 before Election Day 2020, if the bull market continues. That would equate to less than a 13% YTD gain.
With about 10 months still to go in his first term, President Trump has moved solidly into 4th place overall for market performance in the post WW II era (surpassing Bush #41 last week). As of Thursday (1/16) the SPX is +55.0% since Election Day 2016. It’s a long road to the next position (Clinton +70.1%) but it is not unrealistic to think the SPX could reach 3,641 before Election Day 2020, if the bull market continues. That would equate to less than a 13% YTD gain.
Thursday, January 16, 2020
Ben Graham
[1/22/20] The Benjamin Graham breakthrough
[7/8/15] 15 Thoughts from Grandmaster Ben Graham
[8/17/06] Foolish Book Review: The Intelligent Investor
[8/11/06] Ben Graham's equation<!- via Rick Daley value_investment_thoughts-->
[11/12/05] brknews passes along this article by Sanjay Bakshi who writes about Graham's rule of minimum valuation.
[11/9/05] Shai has generously passed me more items on Ben Graham from his blog.
[11/7/05] Graham's simple rules
[10/18/05] Two lessons from Benjamin Graham
[8/6/05] Ben Graham is still pointing the way
[8/6/05] A test of Graham's stock selection criteria
[8/5/05] Graham's Net Current Asset Value Strategy (dryice's follow up)
[8/4/05] High Performance Graham Stocks (a Ben Graham screen)
[8/3/05] Graham favored two methods: buying stocks that were selling substantially below the value of their assets, and selecting companies that boasted consistent earnings and solid financial foundations.
[7/8/15] 15 Thoughts from Grandmaster Ben Graham
[8/17/06] Foolish Book Review: The Intelligent Investor
[8/11/06] Ben Graham's equation<!- via Rick Daley value_investment_thoughts-->
[11/12/05] brknews passes along this article by Sanjay Bakshi who writes about Graham's rule of minimum valuation.
[11/9/05] Shai has generously passed me more items on Ben Graham from his blog.
[11/7/05] Graham's simple rules
[10/18/05] Two lessons from Benjamin Graham
[8/6/05] Ben Graham is still pointing the way
[8/6/05] A test of Graham's stock selection criteria
[8/5/05] Graham's Net Current Asset Value Strategy (dryice's follow up)
[8/4/05] High Performance Graham Stocks (a Ben Graham screen)
[8/3/05] Graham favored two methods: buying stocks that were selling substantially below the value of their assets, and selecting companies that boasted consistent earnings and solid financial foundations.
Sunday, January 12, 2020
A prediction for 2020
It is the time of year for predictions and I’ll make one: You will be better off ignoring the Wall Street stock-market predictions for 2020.
Strategists, some of whom are very smart, are issuing precise predictions for where the market will be in 12 months and they look authoritative.
The record shows that they are not as rock-solid as they appear.
In fact, many Wall Street strategists are flagrantly inaccurate. They are about as reliable as a weather forecaster who always calls for balmy sunshine in a city where it rains or snows a lot. It is true that they are right about the market’s direction more often than they are wrong. But that’s only because most of them say the market will rise in the next year, which happens about 70 percent of the time.
The more specific forecasts — like how high or low the market will go in a given year, and whether it will lose half of its value or rise 30 percent — should be treated as fiction.
I’m not exaggerating.
Paul Hickey, a co-founder of Bespoke Investment Group, crunched the numbers for me, updating calculations that I cited four years ago. Sadly, the forecasters are no more impressive now than they were then.
For every calendar year since 2000, Mr. Hickey compared the annual Wall Street consensus forecast in late December with the actual level of the S&P 500 one year later. He found that, on average:
The median forecast was that the stock index would rise 9.8 percent in the next calendar year. The S&P 500 actually rose 5.5 percent.
The gap between the median forecast and the market return was 4.31 percentage points, an error of almost 45 percent.
The median forecast was that stocks would rise every year for the last 20 years, but they fell in six years. The consensus was wrong about the basic direction of the market 30 percent of the time.
Mr. Hickey found that the forecasts were often off by staggering amounts, especially when an accurate forecast would have mattered most. In 2008, for example, when stocks fell 38.5 percent, the median forecast was typically cheery, calling for an 11.1 percent stock market rise. That Wall Street consensus forecast was wrong by 49.6 percentage points, and it had disastrous consequences for anyone who relied on it.
But there is a more reliable and a simpler way to make investing decisions, one that doesn’t rely on putative forecasts. It is based instead on long-term historical data on the broad returns of the stock and the bond markets.
They show that stocks outperform bonds over extended periods, but that stocks are far more volatile than bonds. Holding both stocks and bonds makes sense because they tend to buffer one another.
Investing over the long run through low-cost index funds in a broadly diversified portfolio is a reasonable approach for most people. This is standard wisdom among many experienced hands in investing, and Jack Bogle, the founder of Vanguard, made it a viable strategy for great masses of people by starting the first commercially available index fund. Of course, Warren Buffett recommends this approach. And so does David Booth, the co-founder of the firm Dimensional Fund Advisors and the benefactor for whom the University of Chicago Booth School of Business is named.
Mr. Booth doesn’t make market forecasts, nor does his company, which was built on the research of economists like Eugene Fama, a Nobel laureate in economics at the University of Chicago.
“We don’t try to forecast the future,” Mr. Booth told me in a recent conversation. “We have no ability to do it. Nor does anyone else.”
Instead, Mr. Booth says, forget the forecasts — and, for the purpose of investing, forget about the current news, too. He doesn’t recommend picking individual stocks or bonds.
Keep it simple, he said, and don’t try to outsmart the market. Take on only as much risk you can handle.
“When you have some money to invest, put it into low-cost, diversified index funds,” he said. “Find a stock-bond mix that you are comfortable with. And if you realize you’re not comfortable, change it until you are — and then stick with it for years, and do better things with your life than worrying about where the market is going.”
One way of thinking about risk is to imagine that a terrible downturn is about to occur, he said. “It will happen, if you live long enough. You can count on that.”
If you are a conservative, older investor, as he is, he said, you might consider a portfolio with 25 percent stocks and 75 percent bonds.
Consider the worst stock downturn in our lifetimes, from October 2007 through February 2009, he said.
In that horrendous period, when global markets fell 55 percent, this hypothetical conservative portfolio would have lost about 13.5 percent — and recovered all of the lost ground within 7 months. “When you look at the numbers,” he said, “you may think, ‘I can deal with that and sleep at night.’”
If you are younger or more aggressive in your investing, though, you might want to try a portfolio with more stock in it — say, 60 percent stock, with the remainder in bonds. But be aware that in the 2007-2009 market catastrophe, that portfolio would have lost about 35.6 percent and have required two years to recover entirely.
Because the bond market has been unusually strong, the conservative portfolio gained about 5.2 percent, annualized, over the 20 years through September; the more aggressive one gained slightly more, about 5.3 percent.
There are, of course, no guarantees that these returns will be duplicated in the future, Mr. Booth said.
“What this is, I think, is a reasonable approach to the future, based on the record of the past,” he said.
One thing it is not is a forecast.
-- Jeff Sommer, New York Times
Strategists, some of whom are very smart, are issuing precise predictions for where the market will be in 12 months and they look authoritative.
The record shows that they are not as rock-solid as they appear.
In fact, many Wall Street strategists are flagrantly inaccurate. They are about as reliable as a weather forecaster who always calls for balmy sunshine in a city where it rains or snows a lot. It is true that they are right about the market’s direction more often than they are wrong. But that’s only because most of them say the market will rise in the next year, which happens about 70 percent of the time.
The more specific forecasts — like how high or low the market will go in a given year, and whether it will lose half of its value or rise 30 percent — should be treated as fiction.
I’m not exaggerating.
Paul Hickey, a co-founder of Bespoke Investment Group, crunched the numbers for me, updating calculations that I cited four years ago. Sadly, the forecasters are no more impressive now than they were then.
For every calendar year since 2000, Mr. Hickey compared the annual Wall Street consensus forecast in late December with the actual level of the S&P 500 one year later. He found that, on average:
The median forecast was that the stock index would rise 9.8 percent in the next calendar year. The S&P 500 actually rose 5.5 percent.
The gap between the median forecast and the market return was 4.31 percentage points, an error of almost 45 percent.
The median forecast was that stocks would rise every year for the last 20 years, but they fell in six years. The consensus was wrong about the basic direction of the market 30 percent of the time.
Mr. Hickey found that the forecasts were often off by staggering amounts, especially when an accurate forecast would have mattered most. In 2008, for example, when stocks fell 38.5 percent, the median forecast was typically cheery, calling for an 11.1 percent stock market rise. That Wall Street consensus forecast was wrong by 49.6 percentage points, and it had disastrous consequences for anyone who relied on it.
But there is a more reliable and a simpler way to make investing decisions, one that doesn’t rely on putative forecasts. It is based instead on long-term historical data on the broad returns of the stock and the bond markets.
They show that stocks outperform bonds over extended periods, but that stocks are far more volatile than bonds. Holding both stocks and bonds makes sense because they tend to buffer one another.
Investing over the long run through low-cost index funds in a broadly diversified portfolio is a reasonable approach for most people. This is standard wisdom among many experienced hands in investing, and Jack Bogle, the founder of Vanguard, made it a viable strategy for great masses of people by starting the first commercially available index fund. Of course, Warren Buffett recommends this approach. And so does David Booth, the co-founder of the firm Dimensional Fund Advisors and the benefactor for whom the University of Chicago Booth School of Business is named.
Mr. Booth doesn’t make market forecasts, nor does his company, which was built on the research of economists like Eugene Fama, a Nobel laureate in economics at the University of Chicago.
“We don’t try to forecast the future,” Mr. Booth told me in a recent conversation. “We have no ability to do it. Nor does anyone else.”
Instead, Mr. Booth says, forget the forecasts — and, for the purpose of investing, forget about the current news, too. He doesn’t recommend picking individual stocks or bonds.
Keep it simple, he said, and don’t try to outsmart the market. Take on only as much risk you can handle.
“When you have some money to invest, put it into low-cost, diversified index funds,” he said. “Find a stock-bond mix that you are comfortable with. And if you realize you’re not comfortable, change it until you are — and then stick with it for years, and do better things with your life than worrying about where the market is going.”
One way of thinking about risk is to imagine that a terrible downturn is about to occur, he said. “It will happen, if you live long enough. You can count on that.”
If you are a conservative, older investor, as he is, he said, you might consider a portfolio with 25 percent stocks and 75 percent bonds.
Consider the worst stock downturn in our lifetimes, from October 2007 through February 2009, he said.
In that horrendous period, when global markets fell 55 percent, this hypothetical conservative portfolio would have lost about 13.5 percent — and recovered all of the lost ground within 7 months. “When you look at the numbers,” he said, “you may think, ‘I can deal with that and sleep at night.’”
If you are younger or more aggressive in your investing, though, you might want to try a portfolio with more stock in it — say, 60 percent stock, with the remainder in bonds. But be aware that in the 2007-2009 market catastrophe, that portfolio would have lost about 35.6 percent and have required two years to recover entirely.
Because the bond market has been unusually strong, the conservative portfolio gained about 5.2 percent, annualized, over the 20 years through September; the more aggressive one gained slightly more, about 5.3 percent.
There are, of course, no guarantees that these returns will be duplicated in the future, Mr. Booth said.
“What this is, I think, is a reasonable approach to the future, based on the record of the past,” he said.
One thing it is not is a forecast.
-- Jeff Sommer, New York Times
Thursday, January 09, 2020
lessons from Buffett 1996
Warren Buffett (Trades, Portfolio)’s annual Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) shareholder letters are filled with precious wisdom on investing, finance and business at large.
Below, we highlight a couple of takeaways that we feel are significantly meaningful even after decades, but rather underleveraged among today’s investing community.
Low-frequency wins
“Inactivity strikes us as intelligent behavior. Neither we nor most business managers would dream of feverishly trading highly-profitable subsidiaries because a small move in the Federal Reserve's discount rate was predicted or because some Wall Street pundit had reversed his views on the market. Why, then, should we behave differently with our minority positions in wonderful businesses? The art of investing in public companies successfully is little different from the art of successfully acquiring subsidiaries. In each case you simply want to acquire, at a sensible price, a business with excellent economics and able, honest management. Thereafter, you need only monitor whether these qualities are being preserved.”
Look for things that seldom change
“In studying the investments we have made in both subsidiary companies and common stocks, you will see that we favor businesses and industries unlikely to experience major change. The reason for that is simple: Making either type of purchase, we are searching for operations that we believe are virtually certain to possess enormous competitive strength ten or twenty years from now. A fast-changing industry environment may offer the chance for huge wins, but it precludes the certainty we seek.
Know your boundaries
“Should you choose, however, to construct your own portfolio, there are a few thoughts worth remembering. Intelligent investing is not complex, though that is far from saying that it is easy. What an investor needs is the ability to correctly evaluate selected businesses.
Note that word 'selected': You don't have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.
…
Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily-understandable business whose earnings are virtually certain to be materially higher five, ten and twenty years from now. Over time, you will find only a few companies that meet these standards - so when you see one that qualifies, you should buy a meaningful amount of stock. You must also resist the temptation to stray from your guidelines: If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes. Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio's market value.”
Below, we highlight a couple of takeaways that we feel are significantly meaningful even after decades, but rather underleveraged among today’s investing community.
Low-frequency wins
“Inactivity strikes us as intelligent behavior. Neither we nor most business managers would dream of feverishly trading highly-profitable subsidiaries because a small move in the Federal Reserve's discount rate was predicted or because some Wall Street pundit had reversed his views on the market. Why, then, should we behave differently with our minority positions in wonderful businesses? The art of investing in public companies successfully is little different from the art of successfully acquiring subsidiaries. In each case you simply want to acquire, at a sensible price, a business with excellent economics and able, honest management. Thereafter, you need only monitor whether these qualities are being preserved.”
Look for things that seldom change
“In studying the investments we have made in both subsidiary companies and common stocks, you will see that we favor businesses and industries unlikely to experience major change. The reason for that is simple: Making either type of purchase, we are searching for operations that we believe are virtually certain to possess enormous competitive strength ten or twenty years from now. A fast-changing industry environment may offer the chance for huge wins, but it precludes the certainty we seek.
Know your boundaries
“Should you choose, however, to construct your own portfolio, there are a few thoughts worth remembering. Intelligent investing is not complex, though that is far from saying that it is easy. What an investor needs is the ability to correctly evaluate selected businesses.
Note that word 'selected': You don't have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.
…
Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily-understandable business whose earnings are virtually certain to be materially higher five, ten and twenty years from now. Over time, you will find only a few companies that meet these standards - so when you see one that qualifies, you should buy a meaningful amount of stock. You must also resist the temptation to stray from your guidelines: If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes. Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio's market value.”
Tuesday, January 07, 2020
Just lucky I guess
The distribution of wealth follows a well-known pattern sometimes called an 80:20 rule: 80 percent of the wealth is owned by 20 percent of the people. Indeed, a report last year concluded that just eight men had a total wealth equivalent to that of the world’s poorest 3.8 billion people.
This seems to occur in all societies at all scales. It is a well-studied pattern called a power law that crops up in a wide range of social phenomena. But the distribution of wealth is among the most controversial because of the issues it raises about fairness and merit. Why should so few people have so much wealth?
The conventional answer is that we live in a meritocracy in which people are rewarded for their talent, intelligence, effort, and so on. Over time, many people think, this translates into the wealth distribution that we observe, although a healthy dose of luck can play a role.
What factors, then, determine how individuals become wealthy? Could it be that chance plays a bigger role than anybody expected? And how can these factors, whatever they are, be exploited to make the world a better and fairer place?
We finally get an answer thanks to the work of Alessandro Pluchino at the University of Catania in Italy and a couple of colleagues. These guys have created a computer model of human talent and the way people use it to exploit opportunities in life. The model allows the team to study the role of chance in this process.
The results are something of an eye-opener. Their simulations accurately reproduce the wealth distribution in the real world. But the wealthiest individuals are not the most talented (although they must have a certain level of talent). They are the luckiest. And this has significant implications for the way societies can optimize the returns they get for investments in everything from business to science.
This seems to occur in all societies at all scales. It is a well-studied pattern called a power law that crops up in a wide range of social phenomena. But the distribution of wealth is among the most controversial because of the issues it raises about fairness and merit. Why should so few people have so much wealth?
The conventional answer is that we live in a meritocracy in which people are rewarded for their talent, intelligence, effort, and so on. Over time, many people think, this translates into the wealth distribution that we observe, although a healthy dose of luck can play a role.
What factors, then, determine how individuals become wealthy? Could it be that chance plays a bigger role than anybody expected? And how can these factors, whatever they are, be exploited to make the world a better and fairer place?
We finally get an answer thanks to the work of Alessandro Pluchino at the University of Catania in Italy and a couple of colleagues. These guys have created a computer model of human talent and the way people use it to exploit opportunities in life. The model allows the team to study the role of chance in this process.
The results are something of an eye-opener. Their simulations accurately reproduce the wealth distribution in the real world. But the wealthiest individuals are not the most talented (although they must have a certain level of talent). They are the luckiest. And this has significant implications for the way societies can optimize the returns they get for investments in everything from business to science.
Thursday, January 02, 2020
2020: more normal?
(AP) — After a year of nirvana, investors may need to get ready for something a little more normal.
Markets are coming off a fabulous 2019, where stocks and bonds around the world climbed in concert. But for the next year — and decade, in fact — Wall Street is telling investors to set their expectations considerably lower.
It’s not calling for another crash like the U.S. stock market suffered just over a decade ago. Or for another run like the last 10 years, where the S&P 500 returned more than 13% on an annualized basis. A gain less than half of that may be more likely, both for next year and annually for the coming decade.
“People need to have a more realistic expectation of what returns are going to be,” said Greg Davis, chief investment officer at Vanguard. “That means investors who are saving for retirement or for college education will likely need to set aside more, because returns won’t be as generous as what we’ve seen over the last decade.”
It’s not because Wall Street sees the U.S. economy falling into a recession, at least not in 2020, even though that’s been a recurring fear for much of the last decade. Much of Wall Street expects the economy to chug modestly higher next year.
Instead, it’s a simple matter of math. Stocks and bonds don’t have as much room to rise after their stellar 2019, analysts say. Starting points matter, and investments began this year at a low point after recession worries pounded markets in December 2018. U.S. stocks will start 2020, meanwhile, close to their highest levels ever.
Wall Street has been busy trying to rein in expectations.
Vanguard forecasts U.S. stocks will return 3.5% to 5.5% annually over the coming decade. Even toward the top end of that range, it’s only half what the market has returned historically. Foreign stocks might offer a bit more, at roughly 7.5% annually, but U.S. bonds look set to offer only 2% or 3% annually over the next decade, according to Vanguard.
Of course, any prediction about where investments will end up is only a guess, no matter how educated. Many on Wall Street came into this year expecting only modest returns given all the worries about interest rates and a possible recession. Now, the S&P 500 is about to close out its second-best year of the last two decades.
Markets are coming off a fabulous 2019, where stocks and bonds around the world climbed in concert. But for the next year — and decade, in fact — Wall Street is telling investors to set their expectations considerably lower.
It’s not calling for another crash like the U.S. stock market suffered just over a decade ago. Or for another run like the last 10 years, where the S&P 500 returned more than 13% on an annualized basis. A gain less than half of that may be more likely, both for next year and annually for the coming decade.
“People need to have a more realistic expectation of what returns are going to be,” said Greg Davis, chief investment officer at Vanguard. “That means investors who are saving for retirement or for college education will likely need to set aside more, because returns won’t be as generous as what we’ve seen over the last decade.”
It’s not because Wall Street sees the U.S. economy falling into a recession, at least not in 2020, even though that’s been a recurring fear for much of the last decade. Much of Wall Street expects the economy to chug modestly higher next year.
Instead, it’s a simple matter of math. Stocks and bonds don’t have as much room to rise after their stellar 2019, analysts say. Starting points matter, and investments began this year at a low point after recession worries pounded markets in December 2018. U.S. stocks will start 2020, meanwhile, close to their highest levels ever.
Wall Street has been busy trying to rein in expectations.
Vanguard forecasts U.S. stocks will return 3.5% to 5.5% annually over the coming decade. Even toward the top end of that range, it’s only half what the market has returned historically. Foreign stocks might offer a bit more, at roughly 7.5% annually, but U.S. bonds look set to offer only 2% or 3% annually over the next decade, according to Vanguard.
Of course, any prediction about where investments will end up is only a guess, no matter how educated. Many on Wall Street came into this year expecting only modest returns given all the worries about interest rates and a possible recession. Now, the S&P 500 is about to close out its second-best year of the last two decades.
2019 stock market best since 2013
Wall Street closed the books Tuesday on a blockbuster 2019 for stock investors, with the broader market delivering its best returns in six years.
The S&P 500 finished with a gain of 28.9% for the year, while the Nasdaq composite rose 35.3%. For both indexes it was the best annual performance since 2013. Technology stocks helped power those gains by vaulting 48%.
The Dow Jones Industrial Average gained 22.3%, led by Apple.
Along the way, the three major indexes set more record highs than in 2018 and kept the longest bull market for stocks going.
”We had a remarkable year of returns in the stock market,” said Keith Buchanan, portfolio manager at Globalt Investments. “Things are much different going into 2020 than they were going into 2019.”
Wall Street’s record-shattering ride in 2019 was not without its bumps.
The market got off to a roaring start in January after Federal Reserve Chairman Jay Powell said the central bank would be “patient” with its interest rate policy following four increases in 2018. That encouraged investors who had been worried the Fed would continue hiking rates. Those concerns helped fuel a sell-off in the final quarter of 2018 that knocked the S&P 500 nearly 20% lower by December of that year.
With Muilenburg gone, attention turns to Boeing’s culture and engineering
US gains a robust 266,000 jobs; unemployment falls to 3.5%
January’s rally helped set the tone for a year in which the market responded to every downturn with a more sustained upswing. Along the way, stocks kept setting records — 35 of them for the S&P 500 index, 22 for the Dow and 31 for the Nasdaq.
By the end of the year, the Fed had completely reversed course and cut rates three times in what Powell called a pre-emptive move against any impact a sluggish global economy and the U.S.-China trade war might have on U.S. economic growth.
The market also overcame a late-summer slump caused by fears that the U.S. economy could be headed for a recession. Those concerns eased as investors drew encouragement from surprisingly good third-quarter corporate earnings and data showing the economy was not slowing as much as economists had feared.
“You fast-forward 12 months and now we’re going into 2020 and the sentiment seems like it’s fairly the opposite,” Buchanan said. ”There are fairly rosy expectations and there’s not a consensus that a recession is coming in a very near term.”
A truce in the 17-month U.S.-China trade war helped keep investors in a buying mood through the end of the year. Washington and Beijing announced in December they reached an agreement over a “Phase 1” trade deal that calls for the U.S. to reduce tariffs and China to buy larger quantities of U.S. farm products.
The S&P 500 finished with a gain of 28.9% for the year, while the Nasdaq composite rose 35.3%. For both indexes it was the best annual performance since 2013. Technology stocks helped power those gains by vaulting 48%.
The Dow Jones Industrial Average gained 22.3%, led by Apple.
Along the way, the three major indexes set more record highs than in 2018 and kept the longest bull market for stocks going.
”We had a remarkable year of returns in the stock market,” said Keith Buchanan, portfolio manager at Globalt Investments. “Things are much different going into 2020 than they were going into 2019.”
Wall Street’s record-shattering ride in 2019 was not without its bumps.
The market got off to a roaring start in January after Federal Reserve Chairman Jay Powell said the central bank would be “patient” with its interest rate policy following four increases in 2018. That encouraged investors who had been worried the Fed would continue hiking rates. Those concerns helped fuel a sell-off in the final quarter of 2018 that knocked the S&P 500 nearly 20% lower by December of that year.
With Muilenburg gone, attention turns to Boeing’s culture and engineering
US gains a robust 266,000 jobs; unemployment falls to 3.5%
January’s rally helped set the tone for a year in which the market responded to every downturn with a more sustained upswing. Along the way, stocks kept setting records — 35 of them for the S&P 500 index, 22 for the Dow and 31 for the Nasdaq.
By the end of the year, the Fed had completely reversed course and cut rates three times in what Powell called a pre-emptive move against any impact a sluggish global economy and the U.S.-China trade war might have on U.S. economic growth.
The market also overcame a late-summer slump caused by fears that the U.S. economy could be headed for a recession. Those concerns eased as investors drew encouragement from surprisingly good third-quarter corporate earnings and data showing the economy was not slowing as much as economists had feared.
“You fast-forward 12 months and now we’re going into 2020 and the sentiment seems like it’s fairly the opposite,” Buchanan said. ”There are fairly rosy expectations and there’s not a consensus that a recession is coming in a very near term.”
A truce in the 17-month U.S.-China trade war helped keep investors in a buying mood through the end of the year. Washington and Beijing announced in December they reached an agreement over a “Phase 1” trade deal that calls for the U.S. to reduce tariffs and China to buy larger quantities of U.S. farm products.