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Illustration: Aïda Amer/Axios

The stock market's magnificent bounce in 2019 has been hard to explain and fueled largely by factors like stock buybacks and central bank easing.

The big picture: But to see an increase in their share prices next year, U.S. companies will have to actually increase their earnings, experts say, a factor that's been notably absent from this year's rally.

By the numbers: As of Tuesday's close, the S&P 500 has risen 25% while U.S. corporate earnings growth has been negligible. Data from FactSet shows the S&P's earnings will likely be negative in every quarter this year — the first time it has fallen in four straight quarters since 2015–2016.

  • To be sure: Companies have seen earnings growth this year, but that has been almost entirely due to stock buybacks, Jill Carey Hall, U.S. equity strategist at BAML, tells Axios. "Pretty much all of it."

State of play: U.S. economic growth also has slowed, as businesses have cut back on investment and capital expenditures, and started boosting their cash holdings.

  • The market hasn't been fueled by a rush of irrational exuberance either. Traders have been net sellers of stocks in every month this year, pulling a record $130 billion from equity mutual funds and ETFs through the end of October, data shows.

What happened: 2019 was all about the rise in multiples, as the S&P 500's price-to-earnings ratio rose over the course of the year.

  • "The Fed was a big contributor" to that theme, Hall says, having cut already low U.S. overnight interest rates three times this year and added nearly $300 billion of bonds to its balance sheet.

What's next: In 2020, analysts expect the Fed to remain on the sidelines through the year and for multiple expansion to cool.

  • Gains in the stock market will come largely from U.S. economic growth and earnings, which fund managers at BlackRock see growing at 8%, combined with an average dividend yield that rivals the U.S. 10-year Treasury note and continued share buybacks from companies.
  • There are no expectations for a meaningful trade war resolution, just a ceasefire that allows the U.S. to grow "around trend," or close to 2% for the year.

The bottom line: "The handoff for growth that we see in 2020 is a meaningfully less powerful driver than multiples were in 2019, which is why the expectations for this coming year are more muted than we’ve seen in 2019," BlackRock's global chief investment strategist Mike Pyle tells Axios.

Go deeper:

Go deeper

Biden's pick to lead major banking regulator drops out

Saule Omarova, nominee for Comptroller of the Currency, at a confirmation hearing on Nov. 18. Photo: Anna Moneymaker/Getty Images

President Biden's pick to head one of the country's most powerful banking regulators is dropping out of consideration for the post, according to a statement from Biden that accepted the withdrawal.

Why it matters: Saule Omarova, nominated to lead the Office of the Comptroller of the Currency, faced a tough path to confirmation — with opposition from Republicans and moderate Democrats.

Judge temporarily blocks Biden vaccine mandate for federal contractors

President Biden delivers remarks at the White House on Dec. 6 in Washington, D.C. Photo: Chip Somodevilla via Getty Images

A federal judge on Tuesday temporarily blocked President Biden's vaccine mandate for federal contractors nationwide.

Why it matters: It's the latest setback in the Biden administration's rollout of COVID vaccine requirements. Federal judges in two states temporarily barred the administration from enforcing mandates for millions of workers last week.

Biden threatens Putin

Photo: Kremlin Press Office/Handout/Anadolu Agency via Getty Images

In a video call that lasted for just over two hours on Tuesday, President Biden warned Russian President Vladimir Putin that if Russia invades Ukraine the U.S. will impose unprecedented sanctions and provide additional weaponry to the Ukrainians, national security adviser Jake Sullivan said.

Why it matters: Russia's military activity on the border with Ukraine has triggered alarms from the U.S. and its European allies of a potential large-scale Russian invasion in early 2022. Sullivan said Biden made clear to Putin that, "things we did not do in 2014, we are prepared to do now."