2019 began with the government stymied by a shutdown, and ended with articles of impeachment levied against the president. In between, both domestic and global economies showed signs of slowing, all while the trade war between the United States and China loomed throughout the year.
Nevertheless, investors remained relatively bullish toward stocks, pushing several major indexes to record highs.
domestic economic growth may have slowed in 2019 compared to 2018, it showed
resilience and stamina. The third-quarter gross domestic product expanded at an
annualized rate of 2.1% — moderately down from 2018's 3.0% rate, yet still
strong enough to outpace global economic growth by a considerable margin. Consumer
spending — which accounts for about two-thirds of the U.S. economy — surged,
buoyed by a strong labor market, near-record unemployment, solid wage growth,
and a burgeoning stock market. All told, the domestic economic expansion
continued into its 11th straight year, the longest run in U.S. history.
Last year saw trade disputes between the United States and several of its trade
partners reach an accord, but the trade war with China roared. The world's two
largest economies engaged in a tit-for-tat skirmish, with each country
volleying tariffs on their respective imports at the expense of the exporting
nation. Coincidentally, a limited deal was announced just before the holiday
shopping season, with the U.S. agreeing to forgo new tariffs and China assenting
to allow more U.S. agricultural imports. Further negotiations are presumed, but
the relationship between the economic giants remains tenuous at best.
Not only did the ongoing trade war affect global economies, but it also impacted domestic business investment, industrial production, and exports. Part of the justification cited by the Federal Reserve for lowering interest rates three times last year was weakness in business fixed investment and exports. As of November, new orders for durable goods were down 1.3% from the same period in 2018, and business (nonresidential) investment fell 2.3% in the third quarter.
The new year begins with a strong stock market and solid economic growth. The Secure Act, passed in late December, should change the retirement planning (and saving) landscape to some extent. However, the Treasury budget deficit for fiscal 2019 (October 2018-September 2019) exceeded $980 billion — 26% higher than the 2018 fiscal-year deficit. The trade war with China may cool with more mutual concessions, or accelerate, which would continue to dampen global economic growth.
The new year will begin with the impeachment process and end with November's presidential election. What happens in between is anyone's guess. Will unemployment and inflation remain low? Will stocks continue to experience growth? Will oil and gas prices moderate or surge? Will the domestic economy continue to accelerate, or suffer a setback? Can the world economy recover, or will it continue to stagnate? If nothing else, 2020 looks to be an interesting year... or at least that’s what I’m currently thinking.
Content Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2020.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indices listed are unmanaged and are not available for direct investment.
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