Happy early Turkey Day! We believe in giving thanks throughout the year, but Thanksgiving is the perfect time to reflect on all we are grateful for and investors have a cornucopia of blessings to count! Between the ongoing economic expansion and the S&P 500 up 26.0% year-to-date (YTD), we have quite a long list. Below are our top ten:
- #1: US Economic Expansion Continues to Trot | December will mark the 126th month of economic expansion. This record run is due in part to resilient personal consumption, which posted its 39th consecutive quarter of growth in 3Q19. We do not think the US consumer will go ‘cold turkey’ anytime soon, as the National Retail Federation expects retail sales during November and December will rise ~4% from 2018 levels. This leads us to believe that the US economy will continue its slow but steady foot race.
- #2: Feast of Fed Rate Cuts | Investors were hungry for rate cuts and the Federal Reserve delivered, providing three 25 basis point ‘insurance’ cuts in light of slowing global economic momentum and trade tensions. We have likened the Fed’s actions to the previous insurance rate cut policies it implemented (1984, 1987, 1995 and 1998), when a 75 basis point cut has historically been a positive for the equity market, leading to a 12-month average forward return of ~23%.
- #3: Plentiful Jobs Harvest | The labor market remains healthy, with the three-month average of job gains (~175,000) remaining in line with the ten-year historical average and continuing to support the near 50-year low unemployment rate of 3.6%. These reports, combined with 3.0% wage growth year-over-year, reaffirm our overall positive economic outlook.