Market wraps up record year

Mike Loewengart, Vice President of Investment Strategy

E*TRADE Capital Management


December capped off an exceptionally strong year for the markets. Bulls forged on, driving equities to record high after record high, while the bond market posted its best year since 2002.1

The Fed, after stepping in to ease rates three times in the midst of recession murmurs earlier this year, hit pause in their last meeting for 2019. Meanwhile, the US economy continued to hum along with a jobs report that trounced expectations, unemployment at a 50-year low, solid industrial production, and rebounding retail sales.

Impeachment proceedings and US-China trade progress dominated headlines last month. While markets essentially ignored the House’s vote to impeach President Donald Trump, they warmly embraced news of a Phase One deal between the two world powerhouses. 

US equities

US equities rallied to new highs through year-end, with the S&P 500® posting its best annual performance since 2013 and the Nasdaq Composite hitting 9,000 for the first time ever. Growth equities beat value for the month and trounced them for the calendar year.

December 2019 US equity performance

FactSet Research Systems

Energy and information technology led sector performance. Energy gained amid an improved outlook for oil demand while IT picked up steam on indications that the Phase One US-China trade deal will likely be signed in early 2020. 

December 2019 sector performance

FactSet Research Systems

International equities

International equities led monthly equity returns, aided by accommodative policy from the European Central Bank and perhaps value-hunting after lagging US equities considerably in 2019. Emerging markets outperformed developed markets last month, with the Latin American region turning in the strongest performance.

December 2019 international equity performance

FactSet Research Systems

Fixed income

Fixed income sectors were mixed for the month. Corporate bonds were positive, led by high yield, while most treasuries were softer as longer-term interest rates rose.

US Treasury yield curve, December 31, 2019

FactSet Research Systems

Market factors in 2020

2019 was one for the record books, and although the market has yet to show signs of slowing down, performance like last year’s would be hard to repeat. As we look ahead to a new year, here are five developments we’ll be watching:

  1. Impeachment and the November election. It’s hard not to get caught up in impeachment headlines, especially during an election year. Investors should keep in mind that many factors will ultimately play into market performance, and neither impeachment nor the election should be a primary focus for long-term investing goals.
  2. Trade negotiations between the US and China. As we saw repeatedly this year, trade headlines can move the markets. While equities surged on recent Phase One news, what Phase Two may look like—if and when it happens—is an open question. And don’t rule out the possibility that things go backwards, and additional tariffs are levied.
  3. Monetary policy and the hunt for yield. With the Fed likely to remain in wait-and-see mode this year, we expect investors will be on the hunt for yield opportunities. But be wary of chasing income in the riskiest parts of the market and remember that a stock’s potential to grow earnings and dividends is crucial in this type of late-stage economy.
  4. Brexit implications. While Boris Johnson’s sweeping win in the British general election provided clarity on the Brexit timeline, it hasn’t erased the uncertainties and potential risks that may arise as longstanding political and trade relationships shift across the globe.
  5. Moderated economic growth. With global growth predicted to continue slowing, having a basket of diversified investments will be paramount. Back-to-back blockbuster years like 2019 are not common and diversification remains a tried and true strategy for weathering market highs and lows.

Bottom line: The market is nothing if not unpredictable. The start of a new year brings with it the opportunity to take a fresh look at your portfolio, your risk tolerance, and your long-term investing goals.

Thanks for reading, and we’ll talk to you again next month.

Click here to log on to your account or learn more about E*TRADE's trading platforms, or follow the Company on Twitter, @ETRADE, for useful trading and investing insights. Online stock, ETF, and options trades are now commission-free.

  1. As represented by the Bloomberg Barclays Aggregate Bond Index, 12/31/2019.
Mike Loewengart
Managing Director, Investment Strategy, E*TRADE Capital Management, LLC

Mike Loewengart is the Managing Director of Investment Strategy for E*TRADE Capital Management, LLC. Mike is responsible for the asset allocation and investment vehicle selections used in E*TRADE’s advisory platforms. Prior to joining E*TRADE in 2007, Mike was the Director of Investment Management for a large multinational asset management company, where he oversaw corporate pension plan assets. Early in his career, Mike was a research analyst focusing on investment manager due diligence for the consulting divisions of several high-profile investment firms. Mike holds series 7, 24, and 66 designations, as well as the Chartered Alternative Investment Analyst (CAIA) designation. He is a graduate of Middlebury College with a degree in economics.

Andrew Cohen, CFA
Senior Director, Investment Strategy, E*TRADE Capital Management, LLC

Andrew Cohen is the Senior Director of Investment Strategy for E*TRADE Capital Management, LLC. Prior to joining E*TRADE, Andrew was the Director of Investments and Operations for a large Registered Investment Advisor, where his responsibilities included investment manager research, asset allocation, and portfolio construction. Previously, he was a Senior Research Analyst and Team Leader for a leading wealth management platform. He is a CFA® charterholder and a member of both the New York Society of Security Analysts and CFA Institute. He is a graduate of Virginia Tech with a BS in finance.

What to read next...

We take a look at the US-China Phase One deal and share a few considerations for investors.

The Federal Reserve on Wednesday opted to leave the overnight fed funds rate unchanged.

Stocks pushed back into record territory in November while trade tensions and recession fears simmered.

Looking to expand your financial knowledge?