Your Market Summary

29/01/2020 | Wealth Management

December 2019

Market Summary

• Growth in markets: TSX up 0.45%, S&P 500 up 0.58%, MSCI International Index up 0.80% in December

• Market’s new highs in December:
– TSX: 17,180 on Dec 24
– S&P 500: 3,247 on Dec 27
– Dow: 28,701 on Dec 27

• Stocks up in December due to:
– proposed trade deal between US and China; halving tariffs on $360 billion of Chinese goods and suspending tariffs on $160 billion of other goods
– Boris Johnson wins majority in U.K. election

• Canada left interest rates at 1.75 per cent

• Canada unemployment rose to 5.9% from 5.5% in November, biggest one-month jump since 2009; losses in manufacturing and also services (ie. public administration)

What we’re watching

• International – On-going global trade war between US and China

– Negative yields on bonds in European Union

• Consumer debt in Canada and US:

– 48% of Canadians $200 away from financial insolvency
– average Canadian owes $1.77 for every dollar earned
– Canadians owe $2.16 Trillion – highest debt load of G7
– 5.54% of consumers were 90 or more days past due on at least one non-mortgage credit product in the third quarter, compared with 5.25 per cent in the same period in 2018

• Interest rates:

– Canada: – 50% chance of a Bank of Canada interest rate cut by July because of weakening employment (up to 5.9% in December from 5.5% in November)
– USA: – no changes expected in 2020

– Europe – last rate cut in September 2019 to -0.50%

• Cdn. dollar – expected to stay between 75 – 80 cents USD

– at 76.9 cents USD on Dec. 31st

Year end 2019

• S&P 500 – 2019 just missed the “Top 10” highest annual return +24.8% (came in at #11)

– Top three highest were: 46.6% in 1931, 45% in 1954 and 41.4% in 1934
– Bottom 3 were: -47.1% in 1931, -38.6 in 1937 and – -38.5% in 2008

• TSX +22.8%

– 2019 almost not even in the Top 20 (#18)
– Top three highest were: 48.4% in 1950, 44.8% in 1979, and 39.1% in 1954;
– Bottom 3 were: -33% in 2008, -25.9% in 1974, and
-20.6% in 1957

• Pot stocks: – Canopy growth: -25.4%

– Aurora: -58.9%
– Cronos: -30.7%
– persistent supply shortages
– delayed launch of edibles and derivatives
– high taxes (ie. 45% in California)
– how to find true value of companies beyond hype

What caused the growth?

• 2019 was strong not by what did happen in markets this year, but what didn’t: – the economy didn’t tip into recession
– interest rates didn’t rise
– US-China trade war didn’t escalate indefinitely

• “End-point bias”: – Markets down approx. 10% Oct ‘18 – Dec ’18 so starting the year from a low point

• Growth in all “Cap” sizes: Large Caps +30%, Mid-Cap +25%, Small-caps +22%

• Best performing sector was Technology, which was up over 40%

• Interest rate cuts in US and Europe
– USA: – cut to 1.5% on October 31st
– Europe – cut in September ‘19 to -0.50%

• Oil up 27.7% ($48.03 / barrel to $61.21 / barrel)

 

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