It was the best year for stocks (S&P 500 Index) since 2013 and the best year for bonds (Bloomberg Barclays U.S. Aggregate Bond Index) since 2002. The diversified investor had an especially good year: A hypothetical 60/40 portfolio with 60% in S&P 500 stocks and 40% in a diversified portfolio of bonds would have posted its best annual performance since 1997.
In 2019, markets also more than made up for the pain of 2018. That was the first year since 1969 in which both stocks and bonds were down during the same year.
Looking out to 2020, it might seem unlikely the strong momentum in stocks could continue. However, history shows the S&P 500 typically has posted above-average performances in the year after a big annual gain, and we’ve tended to avoid a recession. A big year for stocks historically has been a good sign for the economy, too.
“Are the big gains in 2019 forecasting blue skies ahead for the economy and a bull market in 2020?” asked LPL Senior Market Strategist Ryan Detrick. “History would say yes, as a 30% gain for the S&P 500 has led to gains of another 15% on average the next year, and only 2 out of 12 times did that following year fall into a recession.”
As the LPL Chart of the Day shows, when the total return for the S&P 500 has been up more than 30%, stocks have posted above-average gains and the economy rarely has fallen into recession in the following year. We’re hoping 2020 does the same.
IMPORTANT DISCLOSURES
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. The economic forecasts set forth in this material may not develop as predicted.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
This Research material was prepared by LPL Financial, LLC.
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