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  HOME | Business & Economy (Click here for more)

Wall Street in 2019: Year of Record Profits amid China Fears

NEW YORK – Wall Street closes 2019 with its main indicators showing gains of between 22-35 percent.

It has seen record highs after better-than-expected corporate results and three reductions in interest rates, amid fears over a trade war with China and a possible recession.

Looking at the last session of the year, the Dow Jones Industrial rose over 22 percent and exceeded 28,000 points, while the S&P 500 was up 29 percent and the Nasdaq 35 percent, with triple records in November and a batch of brands never seen over Christmas – a phenomenon dubbed the “Santa Claus” rally.

It was particularly positive for tech companies, including those with the highest market share, like Apple (whose value rose around 84 percent) and Microsoft (56 percent).

Wall Street thus extended its longest upward cycle in history, despite the shadow of a recession projected by several investments in the yield curve of public bonds, considered a reliable warning signal.

Some analysts feared a “recession in the results” of corporations but most of the 500 listed in the S&P index showed a “positive surprise” in the third quarter, with earnings per share exceeding estimates, according to analyst John Butters of FactSet.

Wall Street reacted by rewarding those positive surprises, although the firm noted that earnings in the S&P 500 decreased 2.7 percent year-on-year in the third quarter.

The word “tariff” was mentioned in the conferences following the quarterly results of more than 100 companies.

Indeed, what has been a cause of great uncertainty this year has been the trade war with China.

The tug of war between the US and China generated headlines and led investors from pessimism to optimism. As the veteran stock market guru Art Cashin poetically described: “This market has had its heart broken time and time again” – but finally a long-awaited truce between the two governments arrived.

On 13 December, Washington and Beijing reached a partial agreement, fending off tariffs that were due to come into effect two days later.

The US maintains tariffs of 25 percent of Chinese goods valued at $250 billion.

Both parties said they would phase out the tariffs imposed during the dispute.

The Federal Reserve changed its monetary policy trend this year and, for the first time since 2008, lowered interest rates a total of three times due to concerns about the economic slowdown.

In October, the central bank announced it would purchase Treasury bonds until the second quarter of 2020 worth about $60 billion.

At its last meeting in December, the central bank decided to leave unchanged the rates in the range of 1.5-1.75 percent and anticipated keeping them in 2020, noting that the economy was growing moderately thanks to consumer spending.

But business investment and exports showed “weakness.”

In what appears to be one of the best exercises for Wall Street since 2013, analysts have pointed out that investors have withdrawn $135.5 billion from US stocks, according to Refinitiv data, due to the trade war with China and fears over a possible recession.

Economists from the main American banks expect that economic expansion will broaden, although at a more moderate pace in 2020 – a year marked by a presidential election in which incumbent Donald Trump will seek reelection.

 

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