{"id":8340,"date":"2019-11-20T19:55:23","date_gmt":"2019-11-20T19:55:23","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=8340"},"modified":"2022-02-26T13:07:06","modified_gmt":"2022-02-26T13:07:06","slug":"3-reasons-the-market-will-end-the-year-strong","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/3-reasons-the-market-will-end-the-year-strong\/","title":{"rendered":"3 Reasons the Market Will End the Year Strong"},"content":{"rendered":"\n<p>Many readers remember the sudden and sharp S&amp;P 500\ndeclines around this time last year. 2018\u2019s fourth quarter was harsh, to say\nthe least. From the S&amp;P 500\u2019s highs in early October through Christmas Eve,\nthe index dipped into bear market territory with a near perfect -20% decline.<sup>1<\/sup>\nTechnical market watchers would rightfully label this decline a bear market,\nbut throughout history the dangerous bear markets have tended to be the ones\nknown for size <em>and duration<\/em>. Since last\nyear\u2019s Q4 \u2018bear market\u2019 only lasted a day, it likely won\u2019t be remembered in the\nannals of stock market history. <\/p>\n\n\n\n<p><strong>The S&amp;P 500 in\n2018: A Sharp Q4 Correction<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/SP_500_2018-1024x395.png\" alt=\"\" class=\"wp-image-8341\"\/><figcaption> <br><strong><em>Source: Federal Reserve Bank of St. Louis<sup>2<\/sup><\/em><\/strong> <\/figcaption><\/figure>\n\n\n\n<p>In last year\u2019s fourth quarter, trade uncertainty was rising, global economic growth was positive but slightly decelerating, and the Federal Reserve was raising interest rates. In the current quarter (Q4 2019), global growth remains in the same middling decelerating pattern, but the Fed has lowered interest rates three times and \u201cPhase 1\u201d of a potential trade deal is driving some optimism in the markets. In other words, conditions are quite different in 2019 than they were in 2018, and the S&amp;P 500 has been trending modestly higher.<\/p>\n\n\n\n<p>&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_11_20&amp;content=stock_market_outlook_report\">Don\u2019t Let Headlines Get in the Way of Your Investments!<\/a><\/strong><\/p>\n\n\n\n<p>Newsworthy headlines have a tendency of overshadowing truly\nimportant events. So instead of getting caught up in the headlines, focus on\nhard data and economic indicators that could drive the market. To help you do this, we are offering\nall readers a first-look into our just-released December 2019 Stock Market\nOutlook report.<br>\n<br>\nThis 22-page report contains some of our key forecasts to consider in 2019:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><em>Stock market returns expectations for 2019\nand 2020? <\/em><\/li><li><em>Forecast for the S&amp;P<\/em><\/li><li><em>What of slowing foreign growth?<\/em><\/li><li><em>Can the U.S. stock market rally stick?<\/em><\/li><li><em>Which sectors are hot and which are not?<\/em><\/li><li><em>What industries within those sectors most\nmerit your attention?<\/em><\/li><li><em>Odds of recession<\/em><\/li><li><em>And much more.<\/em><\/li><\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and want to learn more about\nthese forecasts, click on the link below to get your free report today!<\/p>\n\n\n\n<p><br> <strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_11_20&amp;content=stock_market_outlook_report\">IT&#8217;S FREE. Download the Just-Released December 2019 Stock Market Outlook<\/a><sup><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_11_20&amp;content=stock_market_outlook_report\">3<\/a><\/sup><\/strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_11_20&amp;content=stock_market_outlook_report\">\u00a0<\/a><br> <br> &#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;<\/p>\n\n\n\n<p><strong>The S&amp;P 500 YTD 2019\nThrough October 31: A Smooth Start to Q4 (So Far)<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/Image-2-1024x395.png\" alt=\"\" class=\"wp-image-8342\"\/><figcaption> <br><strong><em>Source: Federal Reserve Bank of St. Louis<sup>4<\/sup><\/em><\/strong> <\/figcaption><\/figure>\n\n\n\n<p>To be fair, however, we now have an environment where the\nglobal manufacturing sector is in recession, business investment is softening,\nand corporate earnings are on pace for their third straight quarter of\ndeclines. So, what has me convinced that the S&amp;P 500 will finish 2019 in\nsolidly positive territory? I\u2019ll give you three reasons. <\/p>\n\n\n\n<p><strong>Reason #1: Positive\nSigns are Being Ignored<\/strong><\/p>\n\n\n\n<p>Regular readers know my opinion that markets love to climb\nthe \u201cwall of worry.\u201d The wall of worry forms when investors get so latched onto\nthe recession narrative that pessimism pervades the airwaves, and people prefer\nto cling to negative news while ignoring positive developments. <\/p>\n\n\n\n<p>We see this happening quite a bit today, with significant\npositive news being overlooked, such as: <\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>The yield curve turned positive with few people\nnoticing<\/li><li>Solid and consistent gains in the labor markets continue\napace<\/li><li>Consumer spending continues to grow at a healthy\nclip<\/li><li>The all-important ISM non-manufacturing index continues\nposting readings in solidly expansionary territory<\/li><li>And so on down the line <\/li><\/ul>\n\n\n\n<p>Instead of the narrative being that the U.S. economy is\ncharting a modest, but healthy growth path in-line with a long-term trend of\n2%, the narrative is instead focused on a matter of when, not if, the U.S. will\nenter a recession. This disconnect between sentiment and reality is bullish, in\nmy view.<\/p>\n\n\n\n<p><strong>Reason #2: Recession\nRisks are Already Deeply Discounted in the Markets<\/strong><\/p>\n\n\n\n<p>In a recent <em>Barron\u2019s <\/em>poll,\n27% of money managers said they had a bullish outlook on stocks, compared to a\nyear ago when 56% of managers were bullish.<sup>5<\/sup> Many managers \u2013 and\ninvestors \u2013 have shifted into defensive positions over the past year, with\nhistorically defensive sectors like Utilities and Consumer Staples leading the\ncharge of market gains in 2019. These sectors now look fairly expensive\nrelative to cyclicals, in my view, which I believe creates an opening for mean\nreversion.<\/p>\n\n\n\n<p><strong>Reason #3: Trade\nUncertainty Will Start to Lift, Bringing Sentiment with It <\/strong><\/p>\n\n\n\n<p>This week has brought with it several developments on the\ntrade war front, with China and the U.S. appearing to agree that tariffs will\nbe reduced or even phased out as part of \u201cPhase 1\u201d of the trade deal. Part of\nthe reason business investment \u2013 and arguably manufacturing \u2013 have been softening\nis because of uncertainty surrounding the trade war. I believe that as we inch\ncloser to clarity and the prospects of early innings of a deal, some of this\nuncertainty will lift and we could see a bounce-back in fixed investment and\nfactory activity. <\/p>\n\n\n\n<p><strong>Bottom Line for\nInvestors<\/strong><\/p>\n\n\n\n<p>Since 1926, the S&amp;P 500 has entered the fourth quarter\nwith double-digit gains on 42 occasions. In 35 of those years, the index\ncontinued its ascent through year-end, posting an average gain of +4.5%. In the\npost-World War II era, the S&amp;P 500 has averaged a +3.8% return in the\nfourth quarter.<sup>6<\/sup> <\/p>\n\n\n\n<p>These metrics are reassuring, and history can be useful in\nhelping us assign probabilities to outcomes. But my real point in sharing those\nmetrics is to demonstrate that last year\u2019s dreadful Q4 was an anomaly in\nhistory. At the end of the day, stocks have gone up more than they have gone\ndown, and I\u2019ve got three reasons to believe this year\u2019s Q4 will fit this\nhistorical pattern. &nbsp;<\/p>\n\n\n\n<p>The takeaway for investors: remember to look past the\nheadlines and focus on the fundamentals. <\/p>\n\n\n\n<p>To help you do this, I invite you to <strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_11_20&amp;content=stock_market_outlook_report\">download our Just-Released December 2019 Stock Market Outlook Report >><\/a><\/strong><br> <br> This Special Report is packed with newly revised predictions for the remainder of 2019 and 2020 that can help you base your next investment move on hard data. For example, you&#8217;ll discover Zacks\u2019 view on:\u00a0<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><em>Stock market returns expectations for 2019\nand 2020? <\/em><\/li><li><em>Forecast for the S&amp;P<\/em><\/li><li><em>What of slowing foreign growth?<\/em><\/li><li><em>Can the U.S. stock market rally stick?<\/em><\/li><li><em>Which sectors are hot and which are not?<\/em><\/li><li><em>What industries within those sectors most\nmerit your attention?<\/em><\/li><li><em>Odds of recession<\/em><\/li><li><em>And much more.<\/em><\/li><\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and want to learn more about\nthese forecasts, click on the link below to get your free report today!<strong><sup>7<\/sup><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Mitch makes the case that last year\u2019s fourth quarter plummet won\u2019t be repeated in 2019<\/p>\n","protected":false},"author":3,"featured_media":7430,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-8340","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8340","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=8340"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8340\/revisions"}],"predecessor-version":[{"id":10681,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8340\/revisions\/10681"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=8340"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=8340"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=8340"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}