Just as in 2018, markets entered turbulence as the year came to a close, but that is also where similarities ended: 2019 finished in the form of a “melt up”, in contrast to the “melt-down” of 2018. The gravity defying markets went into overdrive across the board and despite a growing roster of “red flag” inducing undercurrents, most notable of which were the creeping protectionism and a major “recalibration” of the world order. The eleventh-hour rally caught most pundits, who a few months earlier were forecasting gloom and doom, by surprise1. This ended up being a year where you really had to try hard to “lose” money, almost every asset class out there, whether it was stocks, bonds, real estate or commodities, ended in the positive. Likewise, all 11 sectors rallied, led by tech stocks, finishing the year with gains of close to 50%2. It certainly didn’t pay to be overly risk-averse; you were likely “worse off” if you had significant allocations into money markets or invested heavily into hedge funds for whom 2019 was yet another unexceptional year. In short, the higher up you were on the “risk ladder”, the greater were your rewards.
1 In August of 2019, nearly three times as many global fund managers surveyed by Bank of America Merrill Lynch expected weaker global growth over the coming year as expected stronger growth. In November, the optimists actually outnumbered the pessimists. At the start of 2019, the Fed was tentatively planning on three quarter-point increases in the federal funds rate, it basically put those on hold and then cut three times, with two of the cuts coming since August.
2 It wasn’t all clear sailing for the tech sector, 2019 proved catastrophic for the Unicorn IPOs: both Uber and Lyft lost a third of their value from their listing price and WeWork, the most extreme of the proposed IPOs, ended up having its float cancelled and its entire business model is being rethought.
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