US Markets round out 2019 as one of the best years in recent history

Despite the threat of a trade war hanging over the market for most of 2019, stocks rallied to a series of all-time highs

A year ago, after bearish calls gripped markets, the idea that US stocks could go on to achieve one of their best results in decades would have been unimaginable. Fast forward to now, and the record books will speak volumes about the stock market in 2019 and what ended up closing as the best-performing decade since the 1950s.

Major indices achieved a remarkable feat last year, as the S&P 500 soared 28.9%. This was the best result since 2013 (up 29.6%). You’d need to go back more than 20 years to find a comparable result (1997: up 31%). Meanwhile, the Nasdaq leapt 35.2% and the Dow Jones rose 22.3%.

Now that 2019 is behind us, it is an opportune time to reflect on the key themes and talking points from last year, while also reviewing some key contributors towards the strong performance of the Global Growth Portfolio.

Markets responded favourably to the Fed reversing its course on monetary policy

One of the biggest developments of the year supporting strength in US equities was a shift in monetary policy from the Federal Reserve. In fact, this catalyst emerged in the first week of January 2019, when Jerome Powell calmed a market that had been beset by fear until that point.

While the Fed raised interest rates on four occasions in 2018, up to a benchmark of 2.5%, the central bank reversed course in 2019. Policy makers adopted a dovish outlook, slashing rates three times and now indicating a desire to pause.

Lower interest rates encouraged investors to shift capital into the stock market in search of more lucrative opportunities. It also provides corporate America with the prospect of a better long-term growth profile courtesy of cheaper access to debt, thereby underpinning equities.

Trade anxieties occupied investors but didn’t materialise into a telling issue

Although there were periods during 2019 where the market became concerned by increasingly threatening trade rhetoric between China and the US, by the end of the year, investors all but dismissed this issue.

It stands to reason that the market saw through the gamesmanship between the parties, remaining largely unaffected by the issue dragging out. At the same time, the impact of the trade war didn’t really translate over to stock performance, as numerous bellwether companies operating in China showed robust signs of growth.

Sectors that were expected to be hit hardest ended up posting some of the best-performing results across the market. This includes chip developers and IT consumer stocks. In fact, tech stocks were the main driver of the market’s record-breaking run in 2019, which we’ll look at shortly.

Outside of US-China conflict, there were other hiccups along the way. These included import tariffs being imposed on metals from Brazil and Argentina, trade spats with European allies, and even the threat of a NAFTA break-down. However, the localised nature of these events were only felt temporarily and didn’t have a lasting role in quelling positive market momentum.

Soft economic conditions failed to diminish market sentiment