Market Update: Thurs, Jan 9, 2020 | LPL Financial Research

Daily Insights

Stocks up on prospects of Iran de-escalation. Market participants remain squarely focused on the Mideast this morning. Consensus seems to be landing on de-escalation, based on the latest developments and statements from the country’s leaders, buoying investor sentiment. That stance is supported by falling WTI crude oil and gold prices on Wednesday. Though expected, we received confirmation that high-level Chinese trade representatives will sign the phase-one trade agreement on January 15, reportedly at the White House.

Surprising surprises out of Europe. A measure of the frequency of positive economic surprises in Europe has accelerated over the past three months to near 50, one of its strongest readings in recent years and well ahead of the United States’ current reading near zero. The Citi measure for Europe bottomed in October 2019 as expectations fell too far. Better economic performance in Europe relative to expectations since October has not yet translated into better stock market performance relative to the United States, but it is a positive step toward Europe beginning to reverse years of underperformance.

The first five days are in the books. Stocks are near all-time highs after the first five days of 2020, shaking off some scary headlines. A popular market axiom is that stock performance during the first five days of a new year is an indicator of returns over the entire year. We’d be the first to admit one shouldn’t invest based on this strategy, but it does have quite an impressive track record. Looking at the S&P 500 Index historically on a total return basis (including dividends), the full year has been higher 80% of the time when the first five days of a new year are higher. Considering the S&P 500 is up 0.69% after the first five trading days of 2020, could this have bulls smiling in 2020? We take a closer look at this phenomena later today on the LPL Research blog.

 

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