1.The S&P 500 is up nearly 25% in 2019 and history shows the momentum could carry over to next year

Yun Li@YUNLI626

Gina Francolla

KEY POINTS

• Going back to 1928, there have been 17 occasions when the S&P 500 has scored an annual gain bigger or equal to 25%.
• And 71% of the time, the S&P 500 is positive in the following year with an average gain of 7%, a CNBC analysis using FactSet data found.
• The S&P 500 has only had five negative years following a 25% annual return since 1928.

The record-breaking rally has brought the S&P 500′s return this year to nearly 25%, and if the gains hold up for the rest of the year, the market could have more room to run in 2020 if history is any guide.

Going back to 1928, there have been 17 occasions when the S&P 500 has scored an annual gain bigger or equal to 25%. And 71% of the time, the S&P 500 is positive in the following year with an average gain of 7%, a CNBC analysis using FactSet data found.

The S&P 500 was up 24.5% for the year through Friday’s close. Futures were pointing to some more gains on Monday.

The average is skewed by a 36% loss in 1936 around the Great Depression. Looking at the average performance in the “modern” era from 1950 forward, the average annual performance is a gain of 11.25% for the S&P 500 after a banner year.

The S&P 500 has only had five negative years following a 25% annual return since 1928.

Wall Street strategists and investors have said it’s all coming down to President Donald Trump and the China trade war if the market can close out the year with solid gains. The market has been moving on any development in the U.S.-China trade war for nearly two years.

Optimism on a trade resolution has risen recently after the two countries reached a truce and started working up a so-called phase one deal. White House economic advisor Larry Kudlow said the two countries were “getting close” to reaching a trade deal, sending stocks to new all-time highs.

To be sure, next year could be unpredictable due to the upcoming presidential election. Wall Street is already worried about the ascent of Massachusetts senator Elizabeth Warren and her wealth tax proposals. Notable investors including billionaire Paul Tudor Jones and longtime investor Leon Cooperman have warned of a market correction, should Warren take the White House.

https://www.cnbc.com/2019/11/18/market-has-more-room-to-run-if-sp-500-ends-2019-up-25percent-history-shows.html

1.Investors have Sold $230 Billion in Shares this Year Amid a 20% Rise in Global Markets

That said, Citi Says Next Leg in Bull Market Coming as Outflows Turn Around – Investors have sold a net $230 billion in shares this year amid a 20% rise in a gauge of global stocks – That has only happened twice before and when the trend reversed, inflows helped spur another 20% gain over the next year, they said.  “November is on track to be the first month of inflows into emerging and developed market equities funds in two years,” the Citi team wrote. “If they continue, this could add further momentum to the rally.”

From Dave Lutz at Jones Trading

1.Per capita liquid milk consumption in the U.S. has declined more than 40% since 1975.

And the company’s deeply distressed 6.5% bonds maturing in March 2023 recently traded at 15.5 cents on the dollar to yield 87.6%, according to IHS Markit. The spread is 8,584 basis points above comparable Treasury yields.

Dean Foods declares bankruptcy …The drop to penny stock.

No. 1 milk company declares bankruptcy amid drop in demand

By MICHELLE CHAPMAN and DEE-ANN DURBINyesterday

1.Record Short VIX Positioning Reflects a Ton of Fear Elsewhere

By
Luke Kawa

• Shares outstanding in long-volatility ETPs are at record highs
• Sheer size of VIX short contracts still shy of 2019 peak

Bearish bets on stock volatility are close to a record high, raising investor concern that the market is ripe for turmoil. There’s a more benign explanation.

Futures linked to the measure of S&P 500’s implied volatility, known as the “fear gauge”, tend to move inversely to equities. The net non-commercial position — long contracts outstanding less short positions — sank to minus 187,948 last week, its lowest level ever.

https://www.bloomberg.com/news/articles/2019-11-04/record-short-vix-positioning-reflects-a-ton-of-fear-elsewhere

1.100 Year Bond +20%

The Bubble Is Deflating for 100-Year Bonds

That valuation still seems bubblicious; a 1% yield on a bond is analogous to a stock with a price/earnings multiple of 100. With a high P/E stock, you’re betting on big growth down the road. A bond returns only face value at maturity, assuming it’s paid off as promised.

The drop in Austria’s century bond’s price to 168 from 210 still qualifies as a bona fide bear-market decline of 20%. Brigden’s price target is for a further fall, to 143.50. Such price swings typically are associated with tech stocks, not stodgy government bonds.

None of the negative bond yields (still totaling $12.8 trillion) would be possible without European Central Bank policies, Brigden points out. “The ECB brought European yields down by two policies; quantitative easing (a pseudo fiscal policy) and negative rates (punishing thrift to boost asset prices).” Those policies may be reaching their limits, however.

Not only is the ECB close to running out of bonds to buy, in the case of German and Dutch debt, he writes, but other European monetary authorities are beginning to question the usefulness of negative policy rates, notably Sweden’s Riksbank. An article published earlier this year by the Federal Reserve Bank of San Francisco also questioned the effectiveness of the Bank of Japan’s negative interest rates.

Write to Randall W. Forsyth at randall.forsyth@barrons.com

https://www.barrons.com/articles/the-bubble-is-deflating-for-100-year-bonds-51573122603?mod=hp_LEAD_1