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A Bird's Eye View Blog

Fireside Charts: A New Performance Landmark, P/E Multiple Expansion to Thank for Record 2019, and Crude Oil Spikes After U.S. Airstrike

By:BCM Investment Team | Date:Jan03, 2020 | Category: Equity, Economics, Market Highlights, Fireside Charts

Happy Friday, and welcome to the first Fireside Charts of the new decade! We're kicking off 2020 with a look at what made 2019 unique—for the first time ever, all major asset classes outperformed their historical averages. Also, after being a major drag on performance in 2018, multiple expansion accounted for nearly all (over 80%!) of the S&P 500's total return. Q3 earnings reports were full of pleasant surprises, but will it be enough to back up the higher P/E ratios in Q4 or was it simply a case of a low bar benefiting everyone? Meanwhile, much has been made of crude oil's 4% spike following news of the U.S. killing a high ranking Iranian general in an airstrike—and Iran promising retaliation—but is the market reaction just a bunch of sound and fury? Perhaps, given renewable's continued ascent (and April 2019 milestone). And while U.S. manufacturing remains weak (especially according to today's ISM report), several Asian nations have seen some recovery. Finally, a risk-on attitude may be appropriate after a record-setting 2019, but everything needs checks and balances... do your portfolios have them?

 

1. A year for the history books!

 

2019 asset class performance

Source: Charles Schwab, as of 12/31/19

 

 

2. Will the market need to back up the 2019 multiple expansion with higher earnings?

 

s&p 500 total return attribution

Source: WSJ Daily Shot, from 1/3/20

 

 

3. Past geo-political events like this have had short term effects...provided no further escalation...

 

ICE Brent

Source: WSJ Daily Shot & Bloomberg News, from 1/2/20

 

 

4. Good news for the environment!

 

U.S. renewabls vs. coal

Source: WSJ Daily Shot, from 1/3/20

 

 

5. While the aggregate debt situation for Americans is much better than in 2007, there are still many of us who are struggling with debt:

 

U.S. personal debt

Source: Reuters, from 1/2/20

 

 

6. The U.S. fared slightly better than Canada and Mexico...

 

U.S. markit manufacturing pmi

Source: WSJ Daily Shot, from 1/3/20

 

 

7. December PMIs have been mixed so far. Australia and Europe fell into or remain in contraction, but some Asian EM economies are showing signs of life:

 

markit south korea taiwan manufacturing pmi

Source: WSJ Daily Shot, from 1/3/20

 

 

8. Another nice print from emerging Asia!

 

markit india manufacturing pmi

Source: WSJ Daily Shot, from 1/3/20

 

 

9. As humans, even advisors can get caught up in the constant market noise and succumb to our biases. That's why we prefer rules-based systems!

 

hulbert newsletter writers sentiment

Source: SunTrust IAG, from 1/3/20

 

 

 

 

 

 

If you resolved to stay more on top of market and economic trends in 2020, then good news: you've already taken the first step by following the BCM blog! For more insights from BCM and a look at the stories & trends we're following closely, sign up for our monthly newsletter releasing next week.

 

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Disclosure: The charts and info-graphics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are a recommendation to take any action. Individual securities mentioned may be held in client accounts.