After one of the worst pre-Christmas Decembers for the market in recent memory, U.S. equity markets somewhat miraculously eked out a 1.3% gain for the S&P 500 during the much-anticipated Santa Claus rally period. According to noted technical analyst Tom McClellan, “The Santa Claus rally consists of the last 5 trading days of the year plus the first two of the next year.” Based on his research, this period has been positive for the U.S. equity market in 78% of the years since 1928 and was once again for 2018–2019.
Much improved market sentiment, aided greatly by comments from Fed Chair Powell on January 10, fueled an impressive rally for the S&P 500 of 13.5% off the low of Dec. 24, 2018, in just 17 trading days.
What will the rest of 2019 bring?
In Guggenheim Investments’ “10 Macro Themes for 2019,” Chairman of Investments and Global CIO Scott Minerd and the firm’s Macroeconomic and Investment Research Group present the following 10 macroeconomic trends, which they believe are most likely to shape monetary policy and investment performance as “we head toward a recession in 2020.” (Many thanks to Guggenheim Investments for permission to excerpt findings from their report):
FIGURE 1: UNIVERSITY OF MICHIGAN SURVEY OPINIONS ON BUYING CONDITIONS
Net good time to buy due to interest rates (3-month moving average)
Note: Data as of 10.31.2018. Shaded areas represent periods of recession.
Sources: Guggenheim Investments, Bloomberg, University of Michigan
FIGURE 2: GUGGENHEIM RECESSION PROBABILITY MODEL
Note: Data as of 9.30.2018. Q4 2018 recession probability is based on Guggenheim forecast of model inputs. Shaded areas represent periods of recession.
Sources: Guggenheim Investments, Bloomberg, Haver Analytics
FIGURE 3: PRESIDENTIAL APPROVAL RATING
Spread between the president’s party and opposition party voters
Note: Data as of 12.22.2018. Blue shading denotes Democratic presidents; red shading denotes Republican presidents.
Sources: Guggenheim Investments, Gallup
Once again, our thanks to Guggenheim Investments. For more detailed analysis and a full complement of supportive charts, please see the entire report, “10 Macro Themes for 2019.”
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