Quarterly Review & Outlook-4th Quarter 2019

Let all the children boogie.”

-David Bowie, Starman

Two years ago markets entered January fresh off a strong 2017. Economic growth was steady and well-balanced, unemployment was low, and corporate earnings were expected to grow nicely. The S&P 500 was hitting all-time highs, with gains concentrated among a handful of large technology companies. Volatility was in hibernation.

For the economy, 2018 unfolded pretty much on point. GDP grew the fastest since 2005, corporate earnings were up 20%, and U.S. businesses created 2.7 million jobs, third most since the crisis. 2018 was arguably the best year of the decade for Main Street. And it was the worst year of the decade for Wall Street. Stocks and bonds both fell, a feat last seen in 1981. Markets look forward, not backward, and in 2018 the S&P 500 suffered its largest drawdown since 2009 as investors grew fearful of an overzealous Fed led by a new and untested Chairman.

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