While warnings of recession, bear markets and trade wars going into and throughout 2019 were rampant, calendar year equity returns are shaping up to be among the best since 2009. What did the market miss, and what insight might it give us for our 2020 forecast? Well, contrary to popular belief, when the market is coming to an inflection point, it is fundamentals that show the way, notprice action, which in fact often shows the wrong way.
The gathering storm clouds that first began forming across Europe, and then China are now developing over the U.S. In Europe, it seems imminent that the third quarter will signal a recession; China has its hands full with the U.S. supply chain; and the U.S. suffered a substantial negative surprise in its very important manufacturing sector.
We unabashedly tout our 2019 theme, “The Storm before the Calm,” as it accurately unfolded in the markets in the first half. The storm in December was followed by a calm from January through April, which sent markets to near record highs.
In 2019 we expect, and prudent investors should prepare for, “the storm before the calm” — tighter monetary conditions, uncertainty that includes a “disorderly Brexit” and increasing tensions between China and the United States on multiple fronts.
This autumn marks 10 years since the Great Recession, the worst economic crisis of our time, which arguably came very near to a global depression.
Strong economic news punctuated the first half of the year, yet markets remained mired in struggle. Main Street has been celebrating as the economy has quietly amassed record highs in U.S. wealth, employment and spending.