Many of the major indexes hit record highs after a strong fourth quarter. For the three months ended December 31, the S&P 500 and the Russell 2000 (small U.S. companies) posted gains of 9.1% and 9.9%, respectively. In international markets, the MSCI EM index led the way, rising 11.8%, while the MSCI ACWI ex US gained 8.9%. For the full year, as shown in the chart, global stocks, in aggregate, gained 26.6%.
The Federal Open Market Committee decreased the federal funds rate one-quarter percent (0.25%) in the fourth quarter. This was the third rate cut for 2019, ending the year with a target range of 1.50% – 1.75%.
Yields on the 10-year treasury rose slightly (0.24%), ending the year at 1.91%. Crude oil prices (West Texas Intermediate) climbed steadily in the quarter, closing the year at $61.21 per barrel. The price of gold ended the year at $1,520, which was slightly higher than the previous quarter close of $1,479.30.
In the U.S., broad economic conditions remain mostly positive. Holiday consumer spending was strong, wage growth continues, and inflation remains mild. Manufacturing measures are sending mixed signals, but the overall job market remains steady. Outside the U.S, there are early signs that economies are bouncing off low levels, which could help those currencies and markets.
The U.S. and China have now signed a “Phase One” trade agreement, and the path for the UK to exit the European Union is also now clear, removing two significant uncertainties for global markets.
Of course there are risks and unknowns, most recently as the Wuhan coronavirus outbreak raises worries, as well as persistent Mideast tensions. In addition, the U.S. impeachment drama continues to unfold, the upcoming 2020 election will be increasingly in the mix, and the long U.S. economic expansion will be closely watched for signs it is coming to an end. While volatility is present and likely to continue, maintaining long-term portfolio targets remains important in order to achieve financial goals.
As always, please call us to address your questions, and make sure to apprise your advisor of any changes to your financial situation.