The 2019 investment markets deserve the superlatives they’re getting in the week ahead; the best S&P 500 stock index performance in six years; gold prices marking their strongest year since 2010; the first 20%-plus gain in stocks and bonds since the late 1990s.
Impressive? Yes. Investors swallowed a lot of uncertainty throughout the year — China trade, Brexit, impeachment. But it was the Federal Reserve that again established its position as the dominant influence over the investment markets. After raising rates four times in 2018, the central bank reversed course quickly this year to cut rates three times.
That economic dovishness overcame worries about the trade war, gridlock in Washington, a fizzled IPO market for hyped-up tech companies, a slowdown in the profit growth for S&P 500 companies, and unpredictability from the tweeter-in-chief.
Many of those pressures will continue in the year ahead. Expect some of them to increase in intensity and frequency, especially the presidential tweeting. After all, it is an election year. Presidential election years have been profitable affairs for investors, but not necessarily because of an election.
Like elections, investing is about the future. History may provide guidance, but it does not provide a guarantee.
It’s human nature to be optimistic at the dawn of a new year. It is a moment to celebrate and reminisce. Recognizing the resiliency and returns of the investment markets is important. However, successful long-term investing is a sober affair about what’s yet to come.
(Article written by Tom Hudson)