2019 was another eventful year (aren’t they all!). Exhibit 1 shows the weekly % changes in the S&P (green and red bars) and the level of the index (black line).  The annotations are the major stories of the year that [could have] affected the markets.  It’s not meant to be a comprehensive list, just my personal observations.

Most relevant for the markets, it was the year of tariffs wars, Brexit drama and Trump-related investigations and eventual impeachment vote in the House. Federal Reserve cut interest rates three times and the market soared in response.

Exhibit 1 – 2019 S&P 500 Timeline

So how did all this turmoil affect the performance of major asset classes? Every single asset class had a positive year, with most posting healthy two-digit returns (Exhibit 2). Once again, US stocks were the best performers but their foreign  counterparts had respectable gains as well. Oil and gold did well also, while bonds had a great year (more below). Dollar had another positive year, but not as positive is it’s alleged currency competitor, Bitcoin. This being the end of the 2010’s decade, I posted 10-year return as well. Pretty good returns all-around but US stocks are quite impressive, specially the growthy Nasdaq ones.

Exhibit 2 – 2019 Performance for Major Categories

The market took off out of the gate and ran straight up until taking a breather in May (Exhibit 3). The largest pullback for SPY was 6.6% into late May, then on to new highs and another 6% pullback in August (Exhibit 4). All in all, it was a pretty smooth ride, pretty similar to 2013 and 2017.

Exhibit 3 – 2019 SPY Performance

Exhibit 4 – 2019 SPY Pullbacks

Switching gears to fixed income, it was a “monster year” in normally mild bond terms (Exhibit 5). All manner of corporate bonds did well, but treasuries also had a big year. The Aggregate Bond index was up 8.5%, the highest since 1998! Most of this exuberance can be attributed to Federal Reserve cutting interest rates three times in 2019. On a 10-year basis the returns in bond land were more subdued but still respectable (3.6% return on the AGG versus 1.7% inflation).

Exhibit 5 – 2019 Performance by Fixed Income Groups

In the next post, I will take a closer look at sector and stock performance.