Good morning, afternoon, or evening and Happy New Year. Say goodbye to 2019 and hello to 2020.
And so another year has come and gone. Today is Dec. 31 and leaves us to wonder: Is the year really over? Yes, it is, as we know. Time does NOT stand still and nor do the markets. It was some year for stocks (globally) and it was some year for news headlines and economic data. What ended so poorly in 2018, ended so beautifully in 2019. Improving economics (against all odds according to what the analysts had predicted), progress on trade with everyone, and not one or two, but three interest rate cuts by the FED along with continued support by the ECB (European Central Bank), the BoE (Bank of England), the PBoC (People’s Bank of China), BoJ (Bank of Japan), the RBA (Reserve Bank of Australia) and the list goes on, (you get the picture, right?) all contributing to the ‘feel good’ mood of the markets.
Technology leading the advance in the US. Actually Apple and Microsoft, which advanced 85% and 55% respectively were the out standers. The XLK rose 56% this year as the industry dealt with issues ranging from security, privacy, and the push to control “fake news” stories advanced across all of the social media platforms. Recall the congressional hearings that featured little boy blue (Marky Zuckerberg) and the beating he and the industry took from lawmakers over exactly what FB and the others were going to do about the spread of misinformation. It’s a conversation that continues today as the industry and the country gears up for the election.
XLI (Industrials) were up 31%, Financials (XLF) + 32%, Healthcare rose by 22% even after getting beaten up for most of the year as the far left “progressive” Democrats took aim at the group. Communications (XLC) were up 33%, Consumer Staples (XLP) and Consumer Discretionary (XLY) rose 26% and 29% respectively, even as concerns over the health of the consumer kept being questioned month in and month out. Utilities (XLU) which represents more of a “safety play” rose by 28%. To round out the group, Energy (XLE) which suffered terribly for most of the year as trade concerns, demand and demand destruction concerns, oil prices and climate warming issues all played a role in how investors reacted to the group, pulled itself out of the doldrums and ending the year nearly 11% higher and setting itself up for what looks like a rebound in the new decade.
It was all very exciting. Treasuries which began the year in the 3% range, ended the year returning 1.9% (remember that price and yield move inversely to each other). Gold, which is also another “safety play” rose 15%, ending the year in the $1525 range. Both are suggesting some level of caution on behalf of investors, nothing new, especially considering the year that global stocks had.
Trade by far was the overwhelming issue for all of the year, as the headlines went back and forth detailing agreements that never came to be. This left investors and algos to react to what they thought was happening. How many times over the year didn’t we get the “good news” from Stevey Mnuchin that a trade deal had been reached, causing stocks to surge, only to find out that a deal had not be reached, causing stocks to plunge. This scene playing over a number of times, leaving investors bruised and frustrated. But as summer ended and the talk got more heated, it didn’t look like a deal was in sight at all, yet the markets didn’t seem to care (anymore), stocks advanced even as the talks seemed destined for failure. Then in mid-September, when it seemed that there was “no deal” in sight, stocks began the fourth quarter dance, falling nearly 5% between mid-September highs to the October 3rd low, sending shivers through the markets as talk of those new tariffs to be imposed in mid-December took hold, leaving many to wonder: Were we in for a repeat performance?
And then it happened: Hope was alive again and talk of a “Phase One” agreement took on new life. With only 12 weeks left in the trading year, a lot of money that had been on the sidelines waiting for “something” was put to work and Santa Claus came early.
Stocks (S&P) advanced 13%, the Nasdaq rose 17% with some help from Apple CEO Timmy Cook, as he appealed to the President to “make a deal” to avoid the December tariff increases which would have hurt Apple bigtime. It was all very interesting to watch. Phase One of the trade deal, while not perfect, had been reached and the algos loved it.
December also brought more political drama as the Democrats proceeded to launch impeachment proceedings again Trump just as the 2020 election season begins to heat up. It was all very orchestrated and dramatic, yet the market and investors around the world were just not interested. Stocks continued to drive higher hitting yet another century mark 3200 on the S&P, taking this year’s journey through eight century marks. On Jan 3rd, the S&P stood at 2447 and today it stands at 3221.
And today, it is all about to end. 2019, which is already gone in parts of the world is about to be gone across the European continent and then it will wash ashore here in the US, ending up in Baker Island, an uninhabited atoll 3090 km southwest of Honolulu in the central Pacific Ocean.
As we say goodbye to the “teens” and say hello to the 20s. It reminds me of the stories of the “roaring 20s” of the 20th century (1920 – 1929). As we wonder what is in store, the world is a much different place, a century later, and is sure to be a different place by the end of this new decade.
Next year is sure to be filled with US election drama and more talk of trade but for now. Stocks are expected to return to returns of historical averages (10% range). That would be good. Interest rates expected to remain at historical lows as the FED is seen doing nothing during this election year, unless of course something dramatic happens. Think inflation rearing her ugly head or some other financial crisis taking hold, which at the moment appears very unlikely. After Super Tuesday on Mar. 3, it should become a bit clearer who the Democrats will put forward and then we will all watch as their platform takes shape. It is sure to be an exciting year across many fronts, but this election is sure to be headline news every day.
It is a pleasure for me to write my daily blog and I thank each and every one of you for your continued support and commentary. I look forward to the year ahead with hope and excitement for what is to come.
Take good care.
Happy New Year – may all of your dreams come true – and may you and your family be blessed with good health and prosperity.
Ricotta Coffee Cream
One more great and simple desert for the holidays –
Ricotta Coffee Cream – If it takes you longer than 1 minute – you did something wrong!
This is a combination of Ricotta cheese, rum, and espresso coffee… (who remembers Medaglia d’Oro Espresso?)
You need: 1 and a half lbs of Ricotta Cheese, 2/3 cup of sugar, 5 tbsp. of dark rum, 2/3 cup of espresso.
Get out the food processor (or blender) – add the ingredients. Blend until you have a nice creamy consistency.
Pour the mixture into individual glasses or small desert cups/bowls. You can use white wine glasses for a more dramatic effect. Place in the fridge and allow to cool. After your dinner party, remove from the fridge – adorn with fresh coffee beans and serve.