A New Roaring 20s?!?!
Welcome to the 20’s! We enter the year with roaring markets and we end a decade that saw not a single US recession, for the first time on record. Growth was slower and the Federal Reserve more accommodating than usual, those both likely large contributors to our record decade.
This market was accommodating as we enter the New Year with stocks markets all up in 20-30% range for the year, far outpacing bonds which returned about 8% but yielding an average of about 3%. That is the key reason that stocks are still likely to hold up relatively well, interest rates are too low to make savings and fixed income attractive long term holdings.
Few investors will lock their funds up long term at 1.8% (the current annual rate for the 10 year Treasury Bond) to 3% (for riskier bonds). Thus capital is likely to find its way back into the stock market at the first signs of stability and keep downturns relatively short.
That said, 2020 is likely to test the word “stability”, and we are already off to a great start. Election years are typically good years for the market, the average is about 12%, but with higher volatility.
We will keep those seatbelts buckled, with a close eye on the markets and paring gains when needed but it is worth taking note that we just finished a fantastic year in the markets.