As 2019 winds down, the financial waters are still relatively calm and the mood is optimistic.
After all, there was a lot of good going on in the 2019 economy. There were 266,000 new jobs added in November, and the unemployment rate was at 3.5%. Stocks have been at an all-time high. Long-term government bonds are on the rise. Corporations have reported strong profits. The Federal Reserve made multiple interest rate cuts, making room for more growth.
We are starting 2020 off with stability and economic growth.
But does that mean it will continue that way? Remember that things can change quickly, and there are some indicators that the economy could take a hit over the next year.
The Yield Curve
I mentioned the yield curve a few times in 2019. It was notable because it inverted this past year, and that is historically an alarm bell for an upcoming recession.
The yield curve has gone back to normal, putting investors’ minds to rest.
The issue is that the yield curve already inverted, and regardless of it returning to normal, that still means a recession could be looming.
That doesn’t mean that investors should panic or not enjoy the current level of comfort in the economy. It just means that it’s important to be prepared.
The Trade War
After 18 months, the U.S. and China agreed to a “phase one agreement” on trade. The deal says that China will purchase billions of dollars in U.S. agricultural purchases and President Trump will not pursue another round of tariffs for China.
The U.S. continues to levy tariffs of 25% on about $200 billion of imports from China.
The tricky part of this agreement is that much of how it plays out is dependent on China, so we don’t know for sure how it will play out over the coming year. This will be a story to follow to see how the rest of the world is impacted.
As we kick off the new year, the economy is expected to start off on a high note and remain stable. Still, remember to be prepared for potential turbulence as the year progresses.
You can read the quarterly updates from 2019 below:
Do you need help planning for retirement? Contact me today to set up a meeting to talk about your goals. You can also download my free ebook for physicians for tips and information about getting your finances on track.