The S&P 500 had a rough start to December, sliding on heightened worries about the fate of the U.S. and China’s trade negotiations. But a variety of indicators, ranging from investor sentiment to the depth of stock-market drawdowns, suggest that the bull market is still on strong footing heading into the end of 2019.
The S&P 500 hasn’t had a one-day pullback of 1% or more since October. If that holds through Monday, it will mark the longest period this year that the broad index has gone without ending down 1% or more, according to Macro Charts.
Markets are also in the midst of what has historically been one of their best months of the year. The Dow Jones Industrial Average, S&P 500 and Russell 2000 index of small-capitalization companies have ended higher in December more than any other month, according to a Dow Jones Market Data analysis that started from each index’s inception. Meanwhile, December has historically been the third-best month of the year for the Nasdaq Composite.
After a strong run, the U.S. stock market is headed for its best one-year gain since 2013. It is also outpacing major indexes from Europe to Shanghai to Japan.
Investors aren’t overly upbeat about the market’s trajectory, though, according to sentiment data from the American Association of Individual Investors. For analysts who view investor sentiment as a contrarian indicator, muted optimism is a positive sign for the durability of the stock rally.
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Data suggest that demand for stocks should stay strong next year, even as both U.S. and global economic growth are projected to slow down further. Goldman Sachs Group Inc. predicts corporations, which for years have been the biggest buyers of stocks in the U.S., will spend $470 billion buying shares in 2020. That would be a 2% drop from 2019, but still in line with the five-year average between 2013 and 2017, before the U.S. tax overhaul went into effect.
Economists also don’t think a recession is imminent just yet. The Federal Reserve Bank of New York’s recession model, which calculates the probability of a recession occurring based off the spread in Treasury yields, currently says there is a 21% chance of a downturn happening in the next 12 months.
—Kenny Jimenez contributed to this article
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December 08, 2019 at 10:00PM
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Bull Market Shrugs Off Weak Start to December - The Wall Street Journal
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