Global equity markets ended a robust 2019 on a high note, with a strong fourth quarter rally adding to already impressive yearto- date gains. Performance over the last several months of the year was driven mainly by sectors of the market, such as technology and health care, thought to have good long-term growth prospects.
In fixed income markets, solid fourth quarter returns capped off what was a remarkable year across the complex. As in the equity markets, the credit rally appeared buoyed by central banks’ return to highly accommodative policy, which repressed volatility and supported bond returns across the quality spectrum.
With a new year upon us, we remain in uncharted equity and economic waters. In the US, the current bull run has been the longest on record, as has the ongoing economic expansion. With unprecedented levels of global monetary stimulus, however, questions remain as to how much of the equity market’s rally over the past 10-plus years should be ascribed to central bank liquidity.
If we had to describe the fixed income market in 2019 with a single word, we would choose “complacent.” While leverage remained elevated among both non-investment grade and investment grade issuers, particularly given the age of the credit cycle, yield spreads were on the tighter end of the spectrum and absolute yields ended the year below where they had been in 2007.
The gold price continued to climb in the third quarter of 2019, reaching a six-year high of $1,552/oz. in early September, as macroeconomic and geopolitical uncertainty continued to support the appeal of perceived safe-haven assets like gold.