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"Everyone knows that if you can keep on making money, everyone's happy." - See who said it and why it matters at the bottom.
Jerome Powell. Photo: Alex Wong/Getty Images
The Fed’s 180-degree turn was the story of 2019, asset managers and market analysts say.
What happened: Chair Jerome Powell and the U.S. central bank went from raising interest rates for a fourth time at the close of 2018 and giving market watchers the explicit expectation this would continue in 2019, to doing the opposite. The Fed cut rates thrice and even began re-padding its balance sheet in the last quarter of the year, bringing it back above $4 trillion.
Why it matters: With an accommodative Fed at its back, the S&P 500 jumped 30%, its best year since 2013 and among the strongest in recent history.
The big picture: In 2019, just about everything delivered gains. Elliot Trexler, CIO of Global Return Asset Management, says his firm generated a 42% return while maintaining an average cash balance of 20% all year.
Yes, but: As Jim Paulsen, chief investment strategist of the Leuthold Group, points out, the bull market was a strange one, with the U.S. stock market led higher by typically defensive investments like high-dividend stocks, consumer staples and utilities.
The Fed began reducing its balance sheet in 2017, and in December 2018 Powell said the reduction would remain on "autopilot" for the foreseeable future.
Why it matters: Simply by not reducing the balance sheet, the Fed is pumping dollars into the economy — buying government bonds and mortgage backed securities — because it replaces the assets that mature with new ones to maintain its holdings.
What they're saying: "The intellectual flexibility of the FOMC is impressive," notes Torsten Slok, chief economist at Deutsche Bank Securities.
The big takeaway from 2019 is that investors should ignore what the Fed says and watch what it does, according to Tendayi Kapfidze, chief economist at LendingTree. And right now it's buying bonds and adding significantly to its balance sheet.
Of note: The Fed held just $870 billion on its balance sheet in August 2007.
President Trump is expected to head to China after signing the "phase one" trade deal later this month and may use the trip to push for more concessions on a new deal. (SCMP)
China's central bank announced its latest stimulus measure, cutting the required reserve ratio for commercial lenders by 50 basis points, releasing about $115 billion of liquidity into the financial system. (Bloomberg)
The FDA is planning a compromise on vaping bans, prohibiting the sale of fruity flavors in cartridge-based e-cigarettes, but not in tank vaping systems commonly found at vape shops. (WSJ)
Big pharma companies, including Pfizer and GSK, will raise prices on more than 200 drugs in the U.S. by an average rate of 5% this year, according to a new study. (Reuters)
Bitcoin proved to be the decade’s best-performing asset, having posted gains of more than 9,000,000% since July 2010. (Bloomberg)
The 2010s were a good decade for stock market investors, easily outperforming the previous decade in which returns were marred by the great financial crisis.
The manufacturing industry in the Midwest continued to contract in December, but did exceed expectations and deliver the best reading in four months.
But, but, but: The October survey's historically low number was impacted by the nationwide strike at General Motors undertaken by the UAW. That was a major factor in the surge of jobs seen in November's nonfarm payrolls report as striking workers returned to their jobs.
Plus, December marks the fourth month in a row the metric has been below 50, in contraction, and the sixth time in seven months.
David Stern, who helped turn the NBA into a global, multibillion-dollar powerhouse as the longest-serving commissioner of any professional sport, died Wednesday at the age of 77.