Stocks are Still Advancing Despite Recent Volatility

September 13, 2019
885 Views

The American economy has slowed in 2019, mirroring conditions throughout the developed world. Corporate stocks profits have declined even though earnings growth has remained strong. The ongoing trade war with China has been a significant market headwind, and it has impacted many American businesses directly. With new tariffs, consumers will be next to feel the effects.

Despite all of this, the stocks market has rallied in 2019. Investors are still incredibly bullish, and some analysts believe that the current market will continue its trajectory well into 2020.

Only Two Negative Stocks Months in 2019

The stock market has posted a positive return in every month this year except for May and August. Tariffs and an inverted yield curve were responsible for volatility during these periods.

  • The Dow Jones Industrial Average (DJIA) is up 16.53% year to date.
  • The S&P 500 (SPX) is up 20.05%
  • The NASDAQ Composite (COMP) is up 23.50%.

These figures speak volumes about the current health of the market. Even while the economy slows, consumer spending is still strong. This has helped to offset corporate profit declines.

It’s not just the obvious indexes that have performed well. The Russell 2000 Index (RUT), which exclusively tracks small cap stocks, has gained 16.80% year to date. In the last month it has outperformed the larger indexes with 7.76% growth.

Bullish sentiment at different ends of the stock market shows that investors and analysts are confident that the economy will continue to expand, despite a slowed rate of growth. While President Trump has consistently criticized the Federal Reserve for its relatively low interest rate cuts, it seems that the conservative approach is working.

Even the Trade War is Getting Better

If the numbers aren’t enough to inspire confidence in the most bearish investors, the relaxed tensions surrounding China trade should make a difference.

China announced on September 11 that it will exempt some previously targeted U.S. products from tariffs. President Trump responded by saying that he will delay a tariff increase on $250 billion of Chinese goods.

Negotiators will meet next month to restart trade talks.

There’s Likely Another Rate Cut Coming

To top it all off, the Federal Reserve is likely to implement a 25 basis-point rate cut at the end of this month. This will further drive markets by increasing consumer confidence and lending affordability.

2019 is a great year to be a stocks market investor. Headwinds have barely made a dent in stock advances, and conditions should remain positive for the rest of the year.

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