2020 First Quarter Market Outlook
What a difference a year makes. In December 2018 we were ending the year on a very negative note while in 2019 we are ending December on a very positive one. In my view the main reason for the sharp turn around has been a positional shift in interest rate and economic stimulus policy by the United States (US) Federal Reserve Board (FED). In December of 2018, the FED raised interest rates another quarter percent along with reducing the money supply from bond holdings by another sixty billion US dollars.
The market sell-off which followed the FED’s action was sending a message to the FED that their current course of action was going to bring on a US recession. To the FED’s credit they picked up on the markets warnings and on January 4, 2019, Jerome Powell the chairman of the FED announced a moderation of the FED interest rate policy. The FED went neutral on its interest rate policy which meant no further interest rate increases. The Global stock markets reacted quickly to the FED news in a very positive manner.
Over the months that followed the FED became even more accommodative reducing interest rates a quarter point three times and stopping any reduction in the money supply. During the last FED meeting on December 11, 2019 interest rates were left unchanged with a forecast of no rate increase for 2020.
In summary through 2019 the FED interest policy has shifted to reduce interest rates which helps stimulate economic growth in the US. I expect this low interest rate policy to continue through most or all of 2020 to be no different. Based on this we are mostly invested with a global and dividend paying focus.
If you have any questions or comments please feel free to contact me.