This year could be one of the best ones ever for investors if the gains in four major asset classes hold.
Stocks, bonds, gold and crude oil are all up nicely for the year. In fact, this could be the first year ever in which all four asset classes rise at least 10%, according to LPL Financial.
The S&P 500 has returned nearly 22% in 2019. Gold and crude are sporting returns of 16.1% and 17.8%, respectively. Bonds are close, with the 10-year Treasury note up more than 9%. The sharp returns across the four major asset classes are a surprise to many investors who have been worried about U.S.-China trade, slowing global economic growth and lackluster corporate earnings.
"As bad as last year was for investors, 2019 is a mirror image," Ryan Detrick, senior market strategist at LPL Financial, said in a statement.
Stocks posted their worst annual performance since 2008 last year after a series of Federal Reserve rate hikes, coupled with rising trade tensions, sent shockwaves through capital markets. Bonds, gold and oil also had a down year in 2018.
The strong performance across asset classes was sparked in large part by a policy shift by the Fed. The U.S. central bank has cut rates twice this year and ended a balance-sheet reduction process earlier than expected.
Bond prices move inversely to rates, so the Fed's monetary policy moves have led to higher Treasury returns in 2019. Lower Fed rates can also spur inflation and boost economic growth, making gold and oil more attractive. Lower rates also makes it cheaper for companies to borrow money to expand their business or increase their share repurchase programs, boosting stocks. Generally strong consumer confidence has also boosted assets, particularly stocks.
And it's been easy to pick stock winners in 2019. Through Wednesday's close, just 75 stocks in the S&P 500 were down for the year while 361 were up at least 10%. Chipotle Mexican Grill and Coty, the index's best performers through Wednesday, were both up more than 80% for 2019. The tech sector is also up more than 30% in 2019, led by Lam Research and KLA Corp. Tech giants Apple and Facebook are both up 53% and 40%, respectively.
Still, the strength across asset classes is surprising given the hurdles investors have had to face in 2019.
China and the U.S. have yet to sign a trade deal that would end the trade conflict that started more than a year ago. Instead, both sides have slapped tariffs on billions of dollars worth of each other's goods.
Earlier this month, President Donald Trump said both sides came to terms on a "very substantial" phase one deal, which includes China buying between $40 billion and $50 billion worth of U.S. agricultural products. However, China has yet to sign off on that first phase.
Global economic growth is also under pressure amid a global manufacturing slowdown. Euro zone manufacturing in squarely in contraction territory while U.S. manufacturing activity fell last month to its lowest level in a decade. Meanwhile, corporate earnings have been under pressure this year in part because of slower economic growth and the trade war.
These factors have not deterred investors from plowing money across asset classes in 2019, however.
The 10-year Treasury was on pace for its best one-year return since 2014, when it returned 10.8%, LPL data shows. Gold futures were headed for their best annual performance since 2010, when the precious metal jumped nearly 30%. Oil is also headed for its best year since 2016, when it popped 45%.