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Summary: The debate over the past year has considered on one hand consistently strong employment growth and consumer spending (2/3 of U.S. economic activity), and on the other slowing corporate earnings growth and risks including the impact of trade disputes, potential increased regulation for big tech (Facebook, Google, etc.), and actions of the Federal Reserve. The threat from the Fed was reversed early in 2019 when it pivoted to cutting rates (and thus providing stimulus) from raising rates. However, it wasn’t until last week with the signing of both the USMCA (United States Mexico Canada Agreement) and Phase 1 of a deal with China that 2019’s most powerful fear-based narrative on trade disputes lost its force.

Summary: The strongest consumer environment in our lifetimes, low interest rates, and ample access to capital underly the market’s favorable momentum heading into 2020, in our view. 2020 is an election year, which is typically disruptive to the consumer. Certain left-leaning policies would be very negative for economic growth, if they were to be enacted. Our advice is focus on 1) the strength of the consumer (whose spending represents 2/3 of U.S. economic activity), 2) the stability of the financial system, and 3) the innovative nature of U.S. companies and industries.

Summary: Markets pushed to new highs on the combination of better-than-expected earnings and stimulus from rate cuts, offsetting and providing a counterpoint to the slowing global growth narrative. The debate in the market over the last 12-months has revolved around the length of the current expansion, valuations, and the likelihood of a downturn in the economic cycle. While there are certainly reasons to be concerned, we continue to focus on the strength of the U.S. consumer. (Consumer spending is more than 2/3 of economic activity in the largest economy in the world, after all.) The consumer remains in a very good state due to the best job market in decades and modest-to-non-existent inflation. We also remain bullish on the innovative qualities of U.S. companies and we believe that access to capital (both for companies and individuals) remains good.

The financial media remains focused on fear-related themes and potential for a recession, but we believe economic weakness can actually be good, if you’re invested in the right companies. On the other hand, the U.S. consumer remains very strong, and consumer spending is more than two-thirds of the U.S. economy. U.S. companies also remain very innovative and ability to raise capital is good. The main risk to global growth seems to be trade disputes between the world’s two largest economies, but, in our opinion, this is a war in name only. We continue to think it makes more sense to position for a positive resolution.