2020 Market Outlook: Happy New Year, Indeed!

For all the angst about trade wars, geopolitics and a sputtering and overly indebted global economy, 2019 might just be the best year investors have ever had. What a difference a year makes: In late 2018 we had recession fears growing as the China trade war escalated and a U.S. Federal Reserve continued to hike interest rates despite signs of slowing economic growth and a sharp stock market correction.

Fast forward to the end of 2019, and policymakers have reversed course, with a trio of Fed rate cuts and a generous dose of new asset purchases fueling stock market gains. Meanwhile Trump's China trade war has culminated in a phase-one China trade deal, avoiding tariffs on hundreds of billions of dollars in goods and turning this year's recession threat into next year's economic stimulus.

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2019 Market Outlook: Past, Present and Future

For the first time in a decade, U.S. equities finished lower in 2018. The S&P saw its biggest annual pullback since the financial crisis. The year got off to a strong start with the second-biggest January rally on record on the back of some spillover from 2017’s synchronized global growth theme, positive sentiment surrounding the recently passed tax overhaul, a strong corporate backdrop, and a fear of missing out (FOMO).

However, some combination of stretched sentiment and positioning, along with heightened sensitivity to higher yields, triggered a spike in volatility and accompanying de-risking led by systematic strategies. This drove the first correction since early 2016, though stocks bounced fairly quickly as the buy-the-dip theme found support from strategist commentary highlighting a disconnect between the market and macro backdrop and the ability of stocks to keep outperforming in a higher yield environment...

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