All good things must end, and this bull market is no exception. The good news is chances are we are not - quite - there yet.
While the markets feel frothy, there are signals the US and the global economy are still set for a decent 2020.
Both Trump and Xi need the win a trade war reprieve provides. A trade truce would provide the stability major companies - and equities - need for further growth.
Monetary policy in the US, Europe, and Japan remains accommodative. Low interest rates help spur spending - both for families and corporations. Eventually if untamed, too low rates can goose inflation. The likelihood central banks remain dovish 'till its too late is a real risk, but only once there are signs of inflationary impulse.
Recessions are a result of imbalances - such as a large debt build up and/or too tight monetary policy. Such imbalances are not yet present in the US or global economy. For example, despite the recently fast growing US government deficit, public debt accumulation has not been strong enough to cause the total US (private + public) debt load to budge.
While stocks may seem expensive, bonds are even more dear. Unless we enter a recessionary environment this year - a scenario we deem unlikely in light of current data - stocks will outperform bonds in 2020.
Monthly Markets Update, November 2019
Last month, the S&P 500 was up 3.63% even as the Dow Jones increased 4.11%, the Russell 2000 added 4.10% and the Nasdaq was up 4.65%.
As for US bonds, they lost -5bps.
Globally, the MSCI World Index increased 2.84% and the Barclays Global Aggregate Bond Index was down -76bps.
The Euro Stoxx 50 added 2.81% in local-currency (Euro) and 1.61% in USD. Meanwhile, the Topix added 1.95% in local-currency (Yen) and 62bps in USD.
