Last year’s US stocks ended on quite the sour note with December 2018 reportedly being the worst since the Great Recession, resulting in the first annual stock market losses in three years. This year was a rebound to say the least, but it wasn’t easy, with the Federal Reserve having to take the lead on the matter.
Trade tensions ensued from President Donald Trump’s approach to the policy and trade with China. “The trade war with China took center stage as the world’s two largest economies imposed tariffs on each other’s imports, and what appeared to be promising negotiations to end the impasse were followed by increasing tensions,” reports CNN Business.
Rates were raised in 2018, but come 2019 the Federal Reserve changed its approach. By the summer the Fed was so concerned, that interest rates were cut in order to stimulate growth, essentially deviating from its own policy forecast for the year. Lower interest rates have a positive impact on businesses, resulting in a better stock market.
Come autumn, the Fed had cut interest rates by three times, which lead Washington and Beijing to be back at the negotiating table, resulting in recession fears being kept at bay. “Just to be sure, the Federal Reserve bought insurance policies in July-October 2019 by lowering interest rates three times. The practical effect of this ease isn’t as important as the signal that the Fed stands ready to provide economic and market support if needed,” said Scott Clemons, Brown Brothers Chief Investment Strategist.
Markets soared to all-time highs, with some having 29 per cent increases and best overall performances since 2013. “While the US manufacturing sector was hit hard by the trade uncertainty, America’s consumers – the backbone of the economy – remained strong,” reported CNN Business.
“The playbook for 2020 will be for stocks to rise higher as markets firmly believe the Fed will be on hold, credit markets are healthy, the consumer is strong and some of the key headwinds in 2019 are becoming tailwinds,” says Edward Moya, senior market analyst at Oanada.