US Stocks: One Year Later, Economic Doom Turns into Economic Boom

What a difference a year makes. Last year at that time, stocks were headed sharply low, but heading into this year’s Christmas-holiday shortened trading week, stocks are set to finish the year at record highs. According to Edward Jones, “The S&P 500 has now posted 31 all-time highs in 2019.

This year’s stellar performance can be chalked up to tremendous gains in the technology sector, positive movement on Brexit, progress on the U.S./China trade front and remarkable strength in the U.S. jobs market.

Last week, the benchmark S&P 500 Index settled at 3221.22, up 1.7%. It’s up 28.5% for the year. The blue chip Dow Jones Industrial Average finished at 28455.09, up 1.1%. For the year, it’s trading 22.0% higher. The technology-based NASDAQ Composite closed at 8924.96, up 2.2%. It’s set to finish the year up nearly 34.5%.

Trade Deals, Economic Growth, Impeachment – Which One Doesn’t Belong?

Investors had a lot on their table last week, but they took everything in stride while pushing the indexes to all-time highs.

The markets were underpinned early in the week on the back of the previous week’s U.S.-China trade deal and UK Prime Minister Boris Johnson’s sound victory in the general election over Brexit. They got a further boost after the U.S. House of Representatives passed the USMCA also known as NAFTA 2.0.

Economic growth was also at the forefront as an updated reading of third-quarter U.S. GDP (2.1%) was supported by upwardly revised consumer spending growth. U.S. housing-market activity also posted impressive gains last week.

There was also an impeachment vote in the U.S. House of Representatives that investors shrugged off, which according to Edward Jones, served as “a reminder that the political drama isn’t the primary driver of market performance over time. Positive economic and corporate performance news has been the driving force behind this year’s sizable gains.”

Last Year versus This Year

In December 2018, investors were already talking recession with the thought driven by trade war tensions, Federal Reserve tightening and a down spin in manufacturing.

This December, the economy is strengthening but not too swiftly. The catalysts underpinning the economy are continued labor-market strength and diminishing tariff threats as U.S.-China trade relations thawed. According to Bloomberg, GDP growth has averaged 2.4% so far this year as unemployment has fallen to a 50-year low and wages rose by at least 3% every month in 2019.