When you think back to the beginning of 2019, the S&P 500 Index and the Canadian TSX Index were licking their wounds after dropping 15% in the final three months of 2018.
The backdrop was grim. Economic growth around the world continued to decelerate, raising concerns of a possible recession.
Moroever, markets were “fighting the Fed”; the U.S. central bank still seemed poised to extend its tightening binge, with its ninth rate hike to 2.5% coming in mid-December 2018.
Clearly, this wasn’t the environment that would have investors expecting to see the S&P 500 Index subsequently rise 31.5% and the TSX appreciate by 22.9%.
The strong performance in 2019 didn’t stop with North American equity markets. Most international equity markets performed in similar fashion. Plus, bond yields fell as did credit spreads, creating a supportive environment for bonds.
Even the Canadian Dollar did well, starting 2019 at 73.3 and finishing at 77.0 cents.
It wasn’t a straight line higher for investments though. Slowing economic growth continued to spread from one country to the next. Germany, with its heavier reliance on global trade, had been flirting with a technical recession. Global manufacturing activity had been contracting. This encouraged central bankers around the world, including the Fed, to cut interest rates and become more accommodative.
One of the biggest contributors to volatility in 2019 was the on-again/off-again trade war, notably between the U.S. and China. This added a great deal of uncertainty and contributed to eroding confidence.
It was certainly a double-edged sword, at times being highly negative for markets and sentiment, followed by periods of optimism. Thankfully, the year ended on the optimistic side of things.
Before we get into our expectations for the year ahead, lets raise a glass to cheer 2019 because unless things go really well in 2020, there may be a bit of a hangover coming.
Stock market valuations are high and geopolitical tensions are on the rise. Look for our full 2020 Investing Outlook later today or tomorrow here on See It Market.
Charts are sourced to Bloomberg or Richardson GMP unless otherwise stated.
Twitter: @ConnectedWealth
Any opinions expressed herein are solely those of the authors, and do not in any way represent the views or opinions of any other person or entity.
