It's already been a solid year of double-digit gains for the stock market, and history suggests that performance may continue through the rest of 2019.
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The S&P 500 and the Dow Jones Industrial Average gained 21.2 percent and 15.9 percent, respectively, through the first 10 months of the year. In years when they’ve posted gains of at least 15 percent and 20 percent, respectively, through October, they have always rallied during the remaining two months.
Similarly, the Nasdaq has rallied 25 percent through the first 10 months of the year, and has climbed during the final two months 90 percent of the time following an advance of at least 20 percent through October. Stocks are gaining some support from the three rate cuts the Federal Reserve rolled out this year, including Wednesday's quarter-point reduction.
“The market fully expects the Fed to be easy here,” Scott Wren, senior global equity strategist for Wells Fargo Investment Institute, told FOX Business, adding he thinks the central bank will trim rates one more time next year.
Wren, who has a year-end S&P 500 target of 3,030 – less than 1 percent above where index settled on Thursday – says the market could “get a little upside” if the U.S. and China are able to reach a minor trade deal. President Trump and his trade team are still on track to sign Phase One of a pact with China even though an event where they planned to do so was canceled earlier this week.
On the other hand, stocks “could fall considerably,” by about 10 percent, if the two sides walk away from the table, he said.
In October, the U.S. and China agreed to the framework of an incremental trade deal that would see China make concessions on intellectual property, financial services and agricultural purchases. The U.S. agreed not to raise existing duties on $250 billion goods from 25 percent to 30 percent on Oct. 15. A decision has not yet been made on tariffs on $160 billion scheduled for Dec. 15.
As for the House impeachment push, Wren says the market is behaving appropriately by not selling off too sharply after Thursday’s vote setting procedures for the public phase of its inquiry. “The probability is not high” that the Republican-controlled Senate would remove the president if the Democrat-led House were to impeach him, Wren added.
Wren likes the technology and consumer discretionary sectors. While he also is hopeful for financials, he says they’re in a “tricky position” as he expects the Fed to cut rates one more time next year, which would impede a key revenue stream for lenders.
“There's a low probability of a recession over the next 12 months,” Wren concludes. “So really, we have a constructive outlook. It's just that these risks, negative risks to that outlook, seem like they've maybe increased here.”