A report suggests that 2019 may be the first year ever that investors witness a rise of at least 10% across four asset classes
Despite all the talk around market turmoil, geopolitical risks, trade tensions, and fixed-income challenges, 2019 is on track to be among the best ever for investors.
A new report from US-based LPL Financial reveals that stocks, bonds, gold, and crude oil have all advanced healthily this year, reported CNBC. They’ve done so well that, according to the firm, it could mark the first year in which all four asset classes cross the 10% annual return threshold.
Equities, as measured by the S&P 500, have advanced nearly 22% in 2019. Gold is up 16.1%, while the WTI benchmark for crude has risen 17.8%. Bonds are at the cusp of double-digit territory as the 10-year Treasury note is up by more than 9%.
“As bad as last year was for investors, 2019 is a mirror image,” Ryan Detrick, senior market strategist at LPL Financial, said in a statement.
According to the firm’s data, the 10-Year Treasury is primed for its best one-year return since advancing 10.8% in 2014. Gold futures are approaching their best annual performance since jumping nearly 30% in 2010, while oil is moving toward its best year since 2016, when it surged 45%.
Last year culminated with stocks posting their worst annual performance since 2008, ostensibly because of capital-market shockwaves from a series of Federal Reserve hikes coupled with rising trade tensions. Bonds, gold, and oil were also all down in 2018.
As CNBC noted, a policy shift by the Fed — which has cut rates twice this year and concluded a balance-sheet reduction process earlier than expected — played a major part in driving the strong performance across asset classes. Since bond prices move inversely to rates, the Fed’s moves have pumped up Treasury returns in 2019.
Lower Fed rates can also lead to stronger economic growth and spur inflation, which increases the appeal of gold and oil. With lower rates, companies are more able to borrow money and expand their business or accelerate their share repurchase programs, effectively boosting stocks.
“Generally strong consumer confidence has also boosted assets, particularly stocks,” CNBC added.
While financial markets are on pace for a record finish, there are still obstacles ahead. After more than a year in conflict, the U.S. and China have year to arrive at a trade deal. While U.S. President Donald Trump has announced a coming-to-terms on a “very substantial” phase-one deal, which includes China purchasing between US$40 billion and $50 billion worth of agricultural products from the U.S., China has yet to sign off on the agreement.
A worldwide manufacturing slowdown is also putting pressure on global economic growth. In the Euro zone, manufacturing activity is squarely in contraction territory, while U.S. manufacturing has descended to its lowest level in 10 years. The twin challenges of slower economic growth and trade drama have also weighed on corporate earnings.
