Buoyed by resilient investor sentiment, strong labor markets, and solid corporate earnings, 2019 ended with a bang. Shrugging off the domestic political turmoil, Brexit drama, and international tensions, investors drove equity markets to new all-time highs. Large-cap stocks in the S&P 500 gained an impressive 9.1 percent in the fourth quarter. For the year, the S&P 500 is up 31.5 percent. Stocks of smaller companies, represented by the S&P SmallCap 600, posted similar gains of 8.2 percent for the quarter, and ended up 22.8 percent for the year.

International stock markets also posted big gains, with the MSCI Europe, Australasia, and Far East (EAFE) index rising 8.2 percent in Q4. For the year, international equities were up 22.0 percent. Once again, domestic equities outperformed non-US equities for the year.

With interest rates not moving much, bonds were mostly flat for the quarter. The Bloomberg Barclays U.S. Aggregate Bond Index gained 0.2 percent for the fourth quarter, bringing its year-to-date performance to a very respectable 8.7 percent.

The Financial Engines perspective.

The fourth quarter demonstrated the power of positive investor sentiment against a backdrop of mostly good economic news. However, it is important not to let recent history create unrealistic expectations for the future. 2019 will go down as a very strong year for world stock markets – well above long-term average returns. But history teaches us that recent performance says little about what the future holds. The coming year may bring below average, typical, or above average returns – but we don’t know which. Markets are inherently tough to predict. Maintaining a diversified portfolio consistent with your time horizon is the key to long-term success. Financial Engines advisors are always here to help.

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