Stock Market: Merry Christmas 2019

(Drivebycuriosity) -  - Christmas is the season for reflection but also for giving gifts. "The best aspect of Christmas is the aspect usually decried by the mystics: the fact that Christmas has been commercialized. The gift-buying . . . stimulates an enormous outpouring of ingenuity in the creation of products devoted to a single purpose: to give men pleasure. And the street decorations put up by department stores and other institutions—the Christmas trees, the winking lights, the glittering colors—provide the city with a spectacular display, which only “commercial greed” could afford to give us. One would have to be terribly depressed to resist the wonderful gaiety of that spectacle". From the Ayn Rand Lexicon (aynrand).

Investors received ample presents this year. Today the US stock market closed near an all-time high. The S&P 500, a gauge for the American stock market, gained 28.6% year-to-date -  a huge difference to the panic from Christmas 2018. The recession, which many had predicted and which 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. 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. China avoided again the hard landing many pundits were calling for and is still growing 6% annually and the tailwinds from relatively cheap oil & extremely low interest rates continue.

I expect that the stock market gains will extend 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 also 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.

There are also continuing tailwinds from the emerging markets. The catching-up process in China, 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 next year.

Merry Christmas to everyone!