After a couple of weeks of weakness (because thoughts the Coronavirus would slow down the global economy), the market last week changed its mind sending equity indexes back up towards record highs!
The S&P 500 rose 3.21% leaving the index now up 3.17% year-to-date. The Dow Jones rose 3.06%; the Russell 2000 2.67% and the Nasdaq Composite lead the way up 4.04%. International equities followed suit with the EAFE Developed Market Index rising 1.86% and Emerging Markets up 2.75%. Bonds fell slightly as the yield on our 10 Year US Treasury rose from 1.51% to 1.58% to close the week last Friday.
So Far For 2020
First – Bonds; The 10 Year US Treasury finished 2019 with a yield of 1.91%. December 31, 2018, the yield finished @ 2.69%. Why are interest rates continuing to fall when the economy continues to motor forward? Much has been speculated, and at the end of the day, no one really knows the exact answer.
Many people believe the bond market is smarter than the stock market! So when yields are falling that means many believe the economy is going to weaken, and perhaps at some point, enter a recession. Observing the employment situation and consumer spending would suggest that’s not going to happen in the immediate future.
For stocks, it’s interesting that Growth Stocks, Year to Date are continuing to outperform Value Stocks by a large margin. This trend started in 2018 and shows very little signs of abating.
Sector performance is also a wide disparity with Information Technology up 8.7% Year to Date, and Energy down (10.4%).
I do know one thing for sure! When the markets decide to change, it happens with little forewarning. If you are near or in retirement, you had better have your investment assets positioned properly prior to any significant change or you will certainly pay the consequences!
The first Friday of each month brings us monthly employment data. Last Friday it was reported the US added 225,000 jobs and average hourly earnings increased 3.1% over the past 12 months. That is certainly impressive to say the least, especially at this stage of the economic cycle! A question that I wonder is… how many more workers can actually be hired going forward with an unemployment rate around 3.6%?!
Election/Political Thoughts Next Week
As an advisor who serves clients ages 60+, I hear a lot of opinions regarding politics. People who are over 60 tend to be very adamant about their feelings and opinions. I do my absolute best to respect ALL opinions. My job is not to infuse my beliefs in portfolio makeup. My job is to interpret what is going on, and position your assets appropriately based specifically on your needs.
I will however start sharing my thoughts on how policy may impact us going forward.
Should we have another tax cut as suggested in the news over the weekend? Should we pay off our kids’ student loans and provide free college educations? What about our Debt situation? Do any politicians actually care?
Stay tuned for much more on politics and the impact on our economy and markets!!!!!