Fourth Quarter 2019

Market Recap

It was a steady march higher for stocks in the fourth quarter. October rallied off expectations of a Federal Reserve interest rate cut, along with assurances that the central bank will continue to be data dependent. Investors began to further anticipate the first phase of a U.S.-China trade deal, and it was announced in December that the agreement would be signed in Washington, D.C., in early 2020. In this environment, earnings growth came back into style, with health care and information technology being the best performing sectors. Classic safe havens like real estate, utilities, and consumer staples underperformed.

Sovereign and corporate sukuk markets finished the fourth quarter of 2019 with strong performance despite geopolitical tensions in the Middle East. The threat of possible conflict between the United States and Iran was more than offset by the market’s appetite for risk, buoyed by the relatively positive macroeconomic outlook in developed markets.

Saudi Arabia remained in the spotlight for much of the quarter as the financial press focused on December’s record-setting initial public offering of Saudi Aramco shares. While the IPO represented only 1.5% of the capital, the valuation of the firm at $1.9 trillion made it the most valuable listed company in history.

As markets enter the new year, the investment environment presents a number of opportunities for equities. After cutting the federal funds rate for the third time in late October, the Federal Reserve is now signaling that it should be a relatively quiet year, with no rate cuts or hikes currently on the horizon. The American consumer appears confident in current and future prospects, as reflected in not only retail sales, but larger purchases like housing, as well.

Notes: The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.