Monthly Market Recap: January 2, 2020

December Market Recap

January 2, 2020

To call 2019 a good year for the stock market would not be incorrect. You could also suggest the Star Wars movie franchise has been “profitable” or that Minnesota winters are “cold.” All of those descriptions are accurate, but none convey the appropriate magnitude.

Like a first-grader on a trampoline, every fall we witnessed from stocks last year resulted in an inevitable bounce higher. As the year edged closer to its conclusion, myriad investors no doubt said to themselves, “If the market can just hold on to these gains…” As it turned out, equities rose consistently through the holiday season, adding a layer of icing on top of already sweet calendar year returns.

The Dow Jones Industrial Average rose 1.7% in December and the tech-heavy NASDAQ more than doubled those monthly gains, climbing 3.5%. Full-year returns for the three major indices ranged from 22% to 35%. All finished 2019 within 1% of their all-time highs.

In terms of sector-specific performance, only a trivial 0.06% loss for Industrials spoiled a perfectly positive month. The other 10 sectors in the S&P 500 all increased at least 1.3% in December. Energy (+6.0%) had the best month of any sector but still finished with the lowest year-to-date returns (+11.8%). Technology (+4.5% in December) capped off an exceptional year with annual returns just north of 50%.

Index December 2019 Total 2019
Dow +1.74% +22.34%
S&P 500 +2.86% +28.88%
NASDAQ +3.54% +35.23%

In hindsight, it may seem surprising that equities fell sharply on the first two trading days of December. The Dow lost 268 points on Dec. 2 due to steel and aluminum tariffs levied by the US against Brazil and Argentina. President Trump indicated the tariffs were meant as a penalty because the two countries have been “presiding over a massive devaluation of their currencies.”

The Dow lost another 280 points on Dec. 3 as sentiment over US-China trade negotiations turned (temporarily) sour. A positive jobs report released on Dec. 6 helped put markets back on an upward trajectory. Monthly US payrolls increased 266,000 (the most since January), wages beat estimates, and consumer sentiment improved.

On Dec. 13, the US and China formally announced an agreement on what’s being referred to as Phase One of a broader trade deal. In its early stages, China has agreed to increase purchases of American agricultural products in 2020 and beyond. They have also made concessions regarding how they treat the intellectual property of US companies doing business in China. In exchange, the US will not impose new tariffs on China and is expected to roll back existing ones.

More details should be released once primary trade negotiators sign the deal in mid-January. In our view, the Phase One agreement being trumpeted by some in Washington is little more than another truce that fails to resolve many of the longer-term issues between the world’s two largest economies. A more comprehensive trade deal remains elusive and is unlikely to materialize prior to the 2020 US presidential election.

The dollar fell nearly 2% in December, which helped international stocks post a strong finish to 2019. Emerging Market equities had their best month since January, gaining 5.8%. Non-US Developed Market equities rose roughly 3%.

Impeachment proceedings continued in Washington but it’s hard to believe there’s any realistic chance a Republican-controlled Senate will convict the President of the charges levied against him. The stock market continues to ignore the political theater, which in our view is the appropriate response.

Bond yields are within striking distance of 2% for the first time since late July. The benchmark 10-year Treasury yield ended the year at 1.92%, compared to 1.77% at the end of November.

Oil prices rose significantly in December due largely to an agreement between Russia and the Organization of Petroleum Exporting Countries (OPEC) to reduce production. West Texas Intermediate Crude closed the year above $61 per barrel, more than 10% higher than a month earlier. The lower production targets will remain in effect until the end of March 2020

 

 

 

The investment objective of the Marks Group Core Equity portfolio is long-term growth, with a secondary objective of dividend income.

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Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

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