Eyes On the Ticker

Eyes on the ticker.  Traders laughed at the politicians yesterday taking stocks to record highs.  The Bulls continue to win in the battle between Republicans and Democrats.

N O T E W O R T H Y

• Goldilocks.  Equity markets continue to defy the odds with the S&P500 hitting its 31st record close yesterday.  All of it amidst a tumultuous year which included a slowing global economy, growing geopolitical risk, inverted yield curves, a trade war, and rancorous politics in the US.  For much of the first two quarters of the year, stocks enjoyed a nice upswing complements of the complementary Fed, which couldn’t say enough to gird the confidence of traders.  Q3 saw the rally sputter a bit as the economic numbers began to show some real signs of weakness, prompting the Fed to take some real action with their so-called “mid-cycle adjustment” in which they lowered Fed Funds by -75 basis points.  The move breathed a little life back into the market, which began a steady climb throughout the fourth quarter in which stocks climbed despite often-shaky trade negotiations between the US and China.  The economy had not fallen into recession as many feared but the macro numbers continued to underwhelm.  That brings us to the final push into the year-end.  A Phase One trade deal has been verbally agreed upon, the President has been impeached as expected, Brexit will happen, and the Fed is proud of its work, reassuring us that the economy is in good shape.  All of these make a good setting for stocks to end the year on a positive note.  The journey is far from over as portfolio managers rebalance portfolios and look ahead to 2020, which many market strategists expect to be not quite as positive as 2019, which is pretty much what they said last year, and the year before.
• Save more, earn more.  Yesterday, the Senate approved the SECURE Act, which stands for Setting Every Community Up for Retirement Enhancement.  Lawmakers are concerned with the statistics that project 41% of households running short of cash later in life.  The bill, which is expected to be signed by the President, provides for some significant changes in retirement savings.  Amongst them, SECURE removes the IRA contribution age limit allowing workers to contribute for a longer period, the RMD age will rise to 72 from 70 1/2, no penalties for retirement account withdrawals to cover birth or adoption, and 401(k) plans will be able to offer annuity products which guarantee fixed payments for life.  On the downside, inherited IRA’s will no longer be able to “stretch” for the life of a non-spouse beneficiary and will be subjected to a mandatory 10-year withdrawal schedule.  Of course there are many other provisions and it is important to speak with your financial advisor or tax specialist to better understand how the act will affect your retirement plan.

THE MARKETS

Stocks jumped to new highs yesterday, ignoring the political drama in the Capital.  The S&P500 climbed by +0.45%, the Dow Jones Industrial Average traded up by +0.49%, the Russell 2000 advanced by +0.32%, and the NASDAQ Composite Index ascended by +0.67%.  Bonds advanced and ten-year treasury yields climbed +1 basis point to 1.92%.

NXT UP

- GDP is expected to have grown by +2.1% consistent with its prior reading.

- Personal Spending is expected to have increased by +0.40% compared to the prior month’s +0.3% growth.

- PCE Core Deflator is expected to be 1.5% year over year down from last month’s 1.6%.

- University of Michigan Sentiment may come in at 99.2 same as the last release.

- Today is a quadruple witching day in which stock index futures, stock index options, stock futures, and stock options all expire.  These days are usually high volume and could see some increased volatility.

- Next week is an abridged week with the Christmas Holiday break (yes it is that close).  We will get Durable Goods Orders, New Home Sales, and some regional Fed reports.  Check back on Monday for details.

daily chartbook 2019-12-20