Wow!
After one of the most volatile Decembers in recent memory left Wall Street in a bloodbath – stocks seem to be on their way back to normalcy – as we are more than halfway through January and stocks have already made up about 10% of their losses.
This is a big deal…
Especially when you remember that many of the talking heads on the tube were talking the “R” word – recession.
After all, the experts said that the volatility spelled “d-o-o-m” for investors as well as the economy – 2019 has seen much calmer waters. So…
What happened? How’d did we go from doom and gloom to sunshine and rainbows? Well…
The answer to that question isn’t easy…
Understand, December has traditionally been one of those months where investor uncertainty runs rampant. Now, it normally doesn’t present itself as a 20% selloff…
But a December after a mid-term election? Yeah, stocks really haven’t performed that hot, historically speaking.
So, what changed it?
Well, many people were looking at the December Jobs report that saw the U.S. gain 312,000 new jobs and wages rise 3.2% on the year.
Now, while this is good – it’s not what’s solely responsible for Wall Street’s turnaround.
There are many different factors…
One of which is what Federal Reserve Chairman Powell said repeatedly at the beginning of the year. And that’s the fact that the Fed will be sensitive to concerns about the economy and would be “patient and flexible” when it came to the topic of raising interest rates.
Investors were alarmed last year by the idea that the Central Bank was determined to keep raising rates, which put the country in danger of running into another recession.
Which would have been tragic – especially seeing how well the economy is doing performing.
It was the Fed’s actions and the media’s penchant to blame Trump for Wall Street’s woes that brought forth the President’s own admonishment of Powell and company when he tweeted, “The only problem our economy has is the Fed.”
One market strategist, from J.P. Morgan, told a source that while he believes that the Fed is trying to be a stabilizing force in the economy, it is also a big reason for the volatility, saying, “What happened last year really shook people and their confidence in investing in equities.”
People were questioning the timing – when the economy was finally booming again after 8 years of the crash and recovery because right now – the United States’ economy is strong.
So, its promise to pump the brakes has a lot of people happy…
Also, now that the dust has settled a lot of people have fingered December’s selloffs for what they actually were…
An overreaction.
Strategists are now saying that the relatively fast recovery could be proof that the December selloff was exactly that – an overreaction to fears about a global slowdown, rising rates, and trade tensions.
The market seems to have recovered from the fears that we’re just a few months away from another recession and it seems as though it’s back to business as usual on Wall Street.
Bernstein Advisors CEO, Richard Bernstein has even said, “December was out of line with fundamentals. I think there was tremendous uncertainty. I described it as shooting ourselves in the economic foot … One of the reasons we’ve been so bullish is there’s this underlying fear in the marketplace that’s normally through time, very bullish. What happens is you had a spike in volatility, which begot more fear.”
This comes from a man who believes that stocks should be higher still by the end of the year.
That’s good news for Wall Street…
And even BETTER news for Main Street.
Also, a recent story broke that we may see the end of the trade war with China soon – as China plans on spending over $1 trillion in the U.S. over the course of the next six years.
Bloomberg wrote, “By increasing goods imports from the U.S. by a combined value of more than $1 trillion over that period, China would seek to reduce its trade surplus — which last year stood at $323 billion — to zero by 2024, one of the people said.”
Add these all together – and you’re looking at a VERY sound economy.
That’s good for everybody…
Making this coming year an important one for investors!
So, if you’re tired of doing all the work and research yourself – you should consider giving GorillaTrades a go…
We’ll do the heavy lifting – you simply check your email. It really is that simple.
If not – no worries! We’re glad you like reading our stuff!
Regardless of what you decide, it’s good to know that you can breathe easily – we’re not looking at a recession!
And that’s awesome…
“Optimism is the faith that leads to achievement. Nothing can be done without hope and confidence.” – Helen Keller