A strong close to a strong year

What happened.

Stocks rose in December, capping a very strong year. In fact, for the year, all the main asset classes we look at—US stocks, international stocks, and bonds—rose. In December, US large- and small-cap stocks rose by 3.02 percent and 2.99 percent (S&P 500 and 600). Foreign stocks also did well. Developed-market stocks rose by 3.25 percent and emerging-market stocks by 7.46 percent (MSCI EAFE and Emerging Markets indices). Bonds fell slightly, with the Bloomberg Barclays Aggregate Bond index down by 0.07 percent, but overall were up for the year. It was a quiet month for market volatility as there were no days where the S&P 500 moved by more than +/- 1 percent.

The table above shows the impressive gains stock markets made in December. Yet it’s important to note that a very small proportion of stocks often drive these returns. In this month’s side-bar, we examine this and look at why it’s important to diversify across stocks within a given market.

Why it happened.

Once again, trade was a major driver of the market. At the start of the month, news of trade tensions sent stocks lower. In the middle of the month, President Trump indicated that a trade deal with China was close, and markets rose.

In addition to trade, there were other factors at play. The news on the US economy was mostly positive, with growth, wage growth, and factory production all beating expectations. Pending home sales and consumer sentiment also rose over previous months.

Overseas economic news was more mixed, with the manufacturing sector in China expanding, while contracting in Europe. And the impressive returns in emerging-market stocks were driven by Hong Kong markets recovering from their initial fall when protests first began.

What this means for you.

For December, as for the whole of 2019, your portfolio is likely to have seen a positive return. Riskier assets did better than less risky ones, meaning that the higher the risk of your portfolio, the higher your overall return would have been. But it is important to remember that we build your individual portfolio using the information you have provided to us. The New Year is a good time to take a fresh look at your goals and to make sure you are on a path towards reaching them. If you have questions, we’re here to help.

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