2019 Year in Review, 2020 Outlook

It’s late January, and all the economic news from 2019 is now available.  In summary, it was a good year overall for the U.S. economy and an excellent year for investors.

Gross Domestic Product (“GDP”) – GDP, the total value of goods and services produced in the U.S. economy, grew in 2019 at approximately 2%.  Forecasted GDP for 2020 remains positive at 1.7%.  GDP growth accelerated to 2.9% in 2018, following the passage of significant tax cuts for business; economists had predicted that growth would slow as the effect of these cuts on corporate profits diminished in 2019.  We are likely to continue with the longest but slowest economic expansion on record (occurring since 2009).  The consensus remains that we are in this continued economic expansion because it has been growing so slowly over the past decade plus.

In 2019, 69% of GDP growth was from consumer spending, consistent with a strong consumer confidence indicator.  Business spending accounted for 17.9% of GDP growth.  Corporations are expected to start building their inventories in 2020, and that could help balance a waning of consumer spending increases.

Economic indicators continue to be positive and neutral (none in the negative territory just yet):

  • The consumer, in general, held up the U.S. economy in 2019, and this will likely continue into 2020. More people are employed (unemployment, at 3.5%, is at fifty-year low), and they are spending money as well.
  • The Federal Reserve lowered the fed funds rate three times in 2019 to stimulate the economy. Other central banks took a similar path, with 65% of them easing monetary policy by lowering rates as well.  2020 will likely see no rate increases or decreases by the Federal Reserve unless unexpected economic conditions arise.  Inflation, hovering around 2.2%, is not a concern for the Fed at this time.
  • Housing and construction look to be strong in 2020 with low mortgage rates likely to encourage new home building and major renovation projects.
  • Manufacturing continues on its decline. At this point, this the only economic sector that is considered to be in recession.

Fixed Income/Bond Markets:

  • Money market rates continue to be minimal, and we don’t see any changes for 2020. As the federal funds rate remains low, so will short-term interest rates.
  • 2019 was a great year for U.S. investment grade bonds. Barclays Aggregate Bond Index was up more than 8%, the highest total return since 2002.  Longer term, we don’t expect this level of performance in fixed income.  In terms of income from investment grade bonds, expect the yield to be in the 2.5% range for the next five years.

US Equities/Stocks:

  • Wow! The magnitude of returns in the U.S. market during 2019 was quite unexpected.  We haven’t seen returns this high since 2013.  While we welcomed them this year, we do not expect to see these returns again in the near future.  The forecast for U.S. stocks in 2020 is positive, yet a bit more subdued.
  • Market volatility is part of the market overall. Historically, the average number of pullbacks (market declines) of 5% or more is four times per year.  In 2019, we had only two pullbacks of 5%.  Staying in the market for the long term, not jumping in and out, is your best plan for success.

International Stock Markets:

  • 2019 was another year of US stocks outperforming international stocks. In fact, this has happened frequently in the past ten years as well.
  • Emerging markets will continue to have more growth potential than developing markets in the year to come.
US Stock/Bond Market Performance for 20191
S&P 500 +28.6%
Dow Jones Industrial Average +22.2%
NASDAQ +34.6%
MSCI EAFE (Large International Stocks) +19.1%
MSCI EAFE EM (Emerging Markets Stocks) +17.0%
Barclays US Aggregate Bond +8.6%


How will politics play in the picture?

  • It is very rare for an economy to go into a recession during an election year. Nine out of the last fourteen recessions have happened in the year after a Presidential election.
  • In a recent Gallup poll, 73% of participants think the economy is good/excellent. That bodes well for an incumbent president.
  • Two factors to watch –
    • Historically, if the employment rate is lower in the election year than the prior year, the incumbent is defeated.
    • Historically, if the equity markets are up for the year three months before the election, the incumbent has won 100% of the time.
  • Because Congress is split, no extreme policy moves are likely to happen this year.
  • What could affect the election year – a brokered convention. According to com, there’s a 15% chance that none of the Democratic candidates will win a majority of pledged delegates through the primary.  This would be the first convention at which a nominee was actually selected since 1952.  Third-party candidates could pull votes from the Democrats and Republicans.  President Trump won Pennsylvania by 44,299 votes in 2016; third party and write-in votes totaled 268,304.

Jennifer Adams



  1. http://bigcharts.marketwatch.com/markets/indexes.asp

Investment Strategy Quarterly.  Raymond James.  Volume 12, Issue 1, January 2020. (https://www.raymondjames.com/branches/library/features/investment_strategy/investment_strategy.pdf)

Any opinions are those of Jennifer Adams and not necessarily those of Raymond James.  The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material.  The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material.  Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Past performance does not guarantee future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions.  The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market.  The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal.  The NASDAQ composite is an unmanaged index of securities traded on the NASDAQ system.  The MSCI EAFE (Europe, Australasia, and Far East) is a free float-adjusted market capitalization index that is designed to measure developed market equity performance, excluding the United States & Canada. The EAFE consists of the country indices of 22 developed nations.  The MSCI Emerging Markets is designed to measure equity market performance in 25 emerging market indices. The index’s three largest industries are materials, energy, and banks.  The Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market.  Sector investments are companies engaged in business related to a specific sector. They are subject to fierce competition and their products and services may be subject to rapid obsolescence.  There are additional risks associated with investing in an individual sector, including limited diversification. International investing involves special risks, including currency fluctuations, differing financial accounting standards, and possible political and economic volatility.  Investing in emerging markets can be riskier than investing in well-established foreign markets. Investing involves risk and investors may incur a profit or a loss.