Jan 07 2020
January 7, 2020

2019 Review – Happy New Year!

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2019 came and went as did the issues which buffeted the stock market since early 2018.  The stock market dropped off a cliff in early 2018 when President Trump began to challenge China over trade policies, currency manipulation and theft of US intellectual property.  The close of 2019 saw agreement between the US and Chinese negotiators on Phase 1 of a new trade deal. 

The dispute with tit-for-tat tariffs slowed manufacturing and agricultural profits in the US but had a much more devasting affect in China.  The consumer carried the US economy through the face-off but China, an export economy, slowed to its weakest growth in 50 years.  And the cracks in the Chinese economic foundation continue to spread and widen.  The Chinese debt bubble has not popped but the debt burden has been exposed.  Bank failures and bond defaults have forced the Chinese government to move financial experts into positions of authority across the country to attempt to deal with the developing problem. 

The focus on the trade dispute has also brought more attention to the heavy-handed approach the Chinese government has taken dealing with ethnic and religious groups within that country.  The months long protest in Hong Kong added to the negative PR the Chinese government is facing.

The US/Chinese trade dispute has added an additional drag to the slowing European economy.  The EU central bank has continued to push negative interest rates and bond buying.

The US economy is the world’s strongest economy.   Consumers are carrying the load buoyed by rising incomes and record low unemployment.  The trade deals agreed to with China, Japan, South Korea, Mexico and Canada are expected to bring US manufacturing back into the black after months of slowdown.

The Federal Reserve’s rush to raise rates in 2018 was reversed with 3 rate cuts in 2019.  The Fed chairman is indicating the Fed will now take a seat on the sideline.  Inflation has not become a problem.  Instead, the Federal Reserve members are expressing some concern over the failure of inflation to reach the benchmark 2% rate.

Going into 2020 the Oak Springs portfolio is 90 to 95% invested, primarily in US equities.  Gold is the only non-dividend paying position.