The market boomed in 2019, with major indexes hitting numerous record highs as stocks posted their best annual return in six years, thanks to the U.S. economy’s moderate expansion holding steady and renewed trade optimism on Wall Street.
On the last of day of trading in 2019, the session capped off a strong year for the stock market: In 2019, the S&P 500 rose by 29%, the Nasdaq by 35% and the Dow Jones Industrial Average by 22%. Both the S&P 500 and Nasdaq posted their biggest one-year gains since 2013, while the Dow’s performance was its best since 2017.
As stocks continued to rise, Wall Street put recession fears on the back-burner, especially as the U.S. economy’s moderate pace of expansion held steady. Solid consumer spending, a robust labor market and an apparent recovery in the housing market have all been good indicators in this regard.
Another huge reason for the market’s renewed optimism in 2019 was the signing of several new trade deals toward the end of the year, including a revised North American trade agreement to replace NAFTA and, after months of on-again, off-again negotiations, the long-awaited phase one trade deal with China.
U.S. and Chinese negotiators agreed upon a phase one deal in October, before both sides officially confirmed terms of the deal in December. As it stands, the phase one agreement is expected to be signed in the first week of 2020, as both sides work to finalize the legal and translation process.
The de-escalation of trade tensions with China was also a boost for the global economy, as tariffs from the last year and a half of the trade war have weighed heavily on international trade volumes.
What’s more, Wall Street is at ease knowing that the Federal Reserve is now on hold, after signalling that it has no plans to cut interest rates in 2020 and will remain on the sidelines unless inflation flares up.
What to watch for: Going into 2020, the market is optimistic that economic growth can continue, especially with diminishing tariff pressures and the Federal Reserve now on hold. Recession fears have been dampened for now, with stocks expected to continue their rise next year—but at a more modest pace, according to strategists polled by Reuters. The market should be boosted by more stable global economic growth, accommodative central bank policies and a recovery in corporate earnings, not to mention defusing trade tensions with China.