What did we learn about the financial markets in 2019?
We learned that…..
- When it seemed the bleakest at the end of December with the S&P 500 Index on the verge of triggering a bear market signal (20% decline from the previous high), the market went on a tear.
- The S&P 500 recorded 34 new record highs and that since 2013 when the market reclaimed the 2007 top, the S&P 500 has set 271 all-time highs (an impressive 16% of all trading days).
- In June, the U.S. economic expansion surpassed the one in the 1990’s to become the longest on record. It is now in its 127th
- Unemployment hit a 50-year low. The U.S. economy added about 2 million jobs last year, bringing the unemployment rate down to 3.5%, the lowest level since the late 1960’s.
- An unusual year in that the market never experienced a 10% correction. For historical comparison, corrections in the stock market – defined as a decline of 10% or more – have occurred, on average, about once a year.
- Volatility was unusually tame with the S&P 500 experiencing only seven daily moves (up or down) of 2% or more in 2019, compared with an average of 19 over the past 20 years.
- The inversion of the yield curve (in March as 10-year rates dipped below three-month rates for the first time since 2007) and known for its ability to predict recessions, did not lead to an economic downturn and ultimately a recession.
- The Federal Reserve does not always do what it says it’s going to do. Instead of continuing its campaign of raising its key interest rate, it did an abrupt pivot in early 2019 and ultimately lowered rates three times, contributing to the strong market’s performance.
- Global growth decelerated to around 3%, the slowest pace in the last decade.
- How difficult it is to predict events and policy changes and their impact on the financial markets in the short-term.
- Trying to time the market (sell high and buy low) is virtually impossible.
- We are reminded that having an investment strategy and sticking to it will increase the likelihood of long-term success, i.e., achieving your personal financial planning goals.