By The Trust Company on February 9, 2020

2019 Year-End Review

By Toby Marks, Vice President, Chief Systems Officer & Portfolio Manager

Toby Marks
2019 was a strong year for markets in general characterized by US equity markets leading the way.  Looking back, it is easy to forget the cold, dark days that wound down 2018 markets. In order to understand the strength witnessed throughout 2019, it is important to recall market weakness and the subsequent pullback that closed out the 4th quarter of 2018. In order to frame both markets into proper context, the 2018 ‘correction’, or now, rather easily recognized in hindsight as ‘over correction’ was characterized by prevailing headwinds stemming primarily from US Federal Reserve policy and US China trade negotiations.

Throughout 2019 those headwinds subsided and have arguably become tailwinds. So now, tradewinds aside, looking back, the 2019 market can be characterized as a year of earnings multiple expansion. While 2019 corporate earnings were solid in comparison to 2018, 2018 earnings had largely been a disappointment. These factors, combined with weaker forward looking earnings projections at the time, contributed to the tale of the two markets and have resulted in driving equity valuations to historic levels.

Earnings Multiple Expansion

US Equities 

2019, as noted, was a strong year for equity markets with US Large Growth leading all asset classes.  US Equity performance for 2019 can further be characterized as Large Caps beating both Mid and Small Caps, while Growth beat Value.  US Large Cap Growth stocks lead all asset class returns posting an impressive 36%. Mid and Small Cap Growth were next in line returning 34% & 33% respectively.  Across the Value spectrum, Large Cap Value outperformed Mid Cap which in turn outperformed Small Cap Value, locking in returns of 26%, 28% and 23% respectively. Across US industry, market leadership came from the Technology (50%), Healthcare, Real Estate & the Utilities sectors while Industrials, Materials & most significantly Energy (15.2%) lagged US markets. We look for these lagging sectors to remain laggards until consistent signs of global growth become evident.

Foreign Equities

Amidst ongoing noise of tariffs between US & China and ongoing trade negotiations foreign equity markets lagged US markets.  Developed markets (22%) kept pace with US Small Cap Value (23%) just above Emerging Markets (18%). While Emerging Markets (EM) represented the worst performing equity segment for the 2019 calendar year, EM finished the year strong, and was the overwhelming Market leader during the 4th quarter and specifically during December (11%, 7%) following the announcements of the phase I trade deal between the US & China. US Large Caps by contrast returned (9%, 3%) over the same periods.

Bond Markets

U.S. Treasury yields posted dramatic swings during 2019, ranging from a low of 1.43% to a high of 2.80%. In March, the 10-year Treasury yield (1.62%) fell below the yield on the 2-year (1.63%). This event unsettled markets as it has not happened since December of 2005 and is often noted as a precursor to recession. The 2005 yield inversion pre-dated the the recession eventually caused by the financial crisis by two years. These kinds of market events are frequently overblown and do in fact often create opportunities for rebalancing portfolios. While we are certain to see future recessions, the timeline, severity and length of recovery are by far the more overriding concerns.

2020 Outlook

By most accounts and given the back-drop of higher equity valuations (refer to Figure 2), lower rates stemming from both market and central bank activities throughout 2019, we anticipate 2020 bringing about higher levels of market volatility along with slowing growth rates.  

US Equity Markets

Current trends bring us to expect continued accommodative central bank policy as long as growth continues and inflation expectations remain low and well below historical levels. Heightened US and geopolitical uncertainties add to this thesis, and global economic growth will be essential for markets to push higher from all time highs. Therefore return expectations going forward should remain tempered. High quality holdings both in equities and fixed income will help anchor portfolios from anticipated increases in volatility, while slow and steady will win the race.



The SECURE Act (Setting Every Community Up for Retirement Enhancement Act) is major legislation that was passed by Congress as part of a larger spending bill and signed into law last December. Here are just a few provisions that may affect you. Unless otherwise noted, the new rules apply to tax or plan years starting January 1, 2020.

Saving for retirement?

To address increasing life expectancies, the new law repeals the prohibition on contributions to a traditional IRA by someone who has reached age 70½. Starting with 2020 contributions, the age limit has been removed, but individuals must still have earned income.

Not ready to take required minimum distributions?

Individuals can now wait until age 72 to take required minimum distributions (RMDs) from traditional, SEP, and SIMPLE IRAs and retirement plans instead of taking them at age 70½. (Technically, RMDs must start by April 1 of the year following the year an individual reaches age 72 or, for certain employer retirement plans, the year an individual retires, if later).

Paying education expenses?

Individuals with 529 college savings plans may now be able to use account funds to help pay off qualified student loans (a $10,000 lifetime limit applies per beneficiary or sibling). Account funds may also be used for qualified higher-education expenses for registered apprenticeship programs. Distributions made after December 31, 2018, may qualify.


Our staff have been studying the provisions of the SECURE Act and how they may affect our clients’ financial plans. More information will become available on our Website but as always, we welcome any questions you may have.

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Click here to read our feature on Associate Trust Officer Preston Schotte.