The stock market rally restarted this year as it did in 2012. The recession, which many had predicted and was almost priced into the stock prices, did not happen and is not around the corner. The trade war against China did not escalate and it´s damages are constrained so far. Trade war or not, the US economy is still sound, jobless rates & weekly jobless claims are close to all-time lows and consumer spending, the engine of the economy, is growing solidly.
I suppose that the rally will continue in 2020 and beyond. During the recessions of the years 2001/02 and in 2008 companies restructured and reduced costs significantly in order to survive. Now they are much fitter and more efficient than before. I believe that this learning process will continue and will translate into a long term trend of rising company profits.
Companies are benefiting from a new industrial revolution: Advances in Internet, mobile computing, 3-d-printing, robotics, nano- & biotechnology and other technologies are reducing costs, raising efficiency and creating new markets. Interest rates are low, thanks to a constraint inflation, and oil costs about halve than in 2012, thanks to US fracking. Reduced taxes and less regulation in the US also are supporting the growth of the company earnings.
We are having solid tailwinds from the emerging markets which are even getting stronger. The catching-up process in China (which is still growing about 6%), India, Indonesia and a lot of other countries translates into high growth in large parts of the global economy that creates continuously rising revenues & profits for global companies like Starbucks, IBM, Caterpillar, Apple, Microsoft, Google and other members of the S&P 500. I assume that the global economy will re-accelerate coming year, thanks to relative cheap oil and the reduced US taxes.
Happy Thanksgiving!
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