(Forbes) – Topline: The stock market rallied higher on Friday, as the S&P 500 crossed its record closing high during day trading thanks to renewed optimism over a trade deal with China and better-than-expected corporate earnings results so far this quarter.
- The S&P 500 has risen nearly 21% this year—now around 0.2% off its record close of 3,027.98, while the Dow Jones Industrial Average is up almost 15% in 2019.
- Markets got a boost after the Trump administration touted progress in trade negotiations with China, as both sides have come close to finalizing parts of the phase one deal.
- Corporate earnings have also come in much better than expected so far: Of the 199 companies in the S&P 500 that have reported earnings to date, just over 78% have beaten estimates, compared to 15% that have missed, according to Refinitiv data (in a typical quarter, only 65% of companies beat estimates and 20% miss expectations).
- What’s more, 2019 is shaping up to be one of the best years ever for investing: Over 80% of stocks in the S&P 500 are up so far in 2019—and 360 different stocks are up over 10%, boosted by lower Federal Reserve rates and strong consumer spending.
- This could well be the first time in history when stocks, bonds, gold and crude all return over 10%, according to LPL Financial’s Ryan Detrick. “As bad as last year was for investors, 2019 is a mirror image,” he wrote in a recent note.
- Last year, the stock market had its worst year since 2008, as several Federal Reserve rate hikes and continuous trade tensions weighed on the markets.
What to watch for: If the rest of corporate earnings results hold steady and we continue to see progress on U.S.-China trade negotiations.
The stock market could well reach new heights in the coming weeks, says John Maloney, chairman and CEO of M&R Capital Management.Today In: Money
Crucial quote: “The commentary from company earnings calls has largely been optimistic with few concerned about an upcoming recession,” points out David Aurelio, senior manager of equity markets research at Refinitiv.
Key background: Uncertainty over slowing global economic growth has lingered this year, leading the Fed to slash interest rates twice so far this year in a bid to sustain the U.S. economy’s “moderate rate” of expansion. Geopolitical and trade tensions have also been an ongoing source of anxiety for the markets, too.
Earlier this month, trade tensions escalated sharply, sending stocks plummeting. In a reversal the following week, Trump then announced that the U.S. and China had reached a “very substantial” phase one trade deal, which is currently being finalized. The agreement in principal addresses intellectual property and financial services, as well as the U.S. holding off on additional tariffs in return for a pledge from China to buy $40 billion to $50 billion of American agricultural products.