Happy days are here again
The skies above are clear again
So let’s sing a song of cheer again
Happy days are here again

All of the major indexes have performed remarkably well in 2019, reaching all-time highs. The Nasdaq topped 9,000 for the first time ever. Since its low in 2009, the Nasdaq has increased more than sevenfold. The S&P 500 has risen 29% this year. In 1997 the S&P achieved its greatest performance, increasing 30%.

Global equity markets (MSCI’s all-country world index) also have attained record levels. The MSCI rose 24% this year. China shares closed higher after Beijing announced plans to bolster its economy, including infrastructure investments.

One has to agree with Chris Rupkey, chief financial economist at Mitsubishi UFG Financial Group. He said: “Stocks look like they just won’t quit. The rally is for real. The economy’s engines continue to hum.”

We are enjoying a “Santa Claus rally.” Traditionally, the stock market enjoys strong performance during the final five trading days of the year and the first two trading days of the New Year. The S&P has posted a 1.3% gain on average since 1950 according to the Stock Trader’s Almanac.

Given the market’s ebullience, we should note some of the factors that have led to this bullish sentiment. The December University of Michigan Sentiment Index remained very favorable. Retail sales over the period from Nov. 1–Dec. 24 have increased 3.4% in comparison with last year. Internet sales are up over 18% during this period. In brief, consumer spending (what households buy to fulfill everyday needs) remains robust. Little ole you and me drive our economy. Our purchases create the demand that keeps companies profitable and encourages them to hire new workers.

There are four factors that determine consumer spending.

  • Disposable income (average income minus taxes) is the most important
  • Income per person
  • Disposable income of low-income families because they spend a significant more share of each dollar on necessities than affluent people.
  • Positive consumer expectations. To the extent that people feel that prices will rise, they will buy more currently, especially if they feel that their paychecks are secure.

The U.S. unemployment rate has fallen to a 50-year low, 3.5%. Such strong numbers should quell worries that we will suffer a recession in the short term.

Investors feel confident that an all out trade war with China has been averted. They have taken on more risk now that the U.S. and China have reached a phase one- trade agreement.

The House of Representatives passed The United States Mexico Canada Agreement (USMCA). Once the Senate passes USMCA, we will have resolved uncertainties with our two biggest trading partners. The following are the key new issues:

• Automobiles must have 75% of their components made in Mexico, U.S. or Canada to qualify for zero tariffs

• 40-45% of automobile parts must be made by workers who earn at least $16 hour by 2023

• U.S. farmers get more access to the Canadian dairy market

• USMCA extends the terms of copyright to 70 years beyond the life of the author.

Over the past few years, I have given lectures on investing for seniors. These are several of the high points. First of all, only invest that percentage of your savings in risky assets that you can psychologically tolerate. Secondly, recognize that while cash gives comfort in the short term, it will hamper your retirement nest egg over time. Thirdly, the Dow Jones has increased 50-fold since I started on Wall Street in the 1970’s. I agree with Warren Buffett: “There are many other countries around the world that have bright futures. Americans will be more prosperous and safer if all nations thrive.”

Originally published in the Sarasota Herald-Tribune