January 9, 2020
Just six days into the new year, and stocks are up 1.4% already, printing higher record highs.
Since we’ve been looking for a repeat of the late 90s for the economy and for stocks, let’s take a look at the way stocks performed to open the latter half of the 90s (hint: it was good).
Remember, we’re talking about the period that followed the 1995 flip-flop by the Fed, where the Fed was forced to reverse course on monetary policy after aggressively tightening into a low inflation, tepidly recovering economy.
They cut rates. Stocks went crazy. And within four quarters the economy was printing growth above 4% (annualized).
And as we’ve observed, that was just the beginning. Stocks went on to do this over the next four years …
And economic growth went on to do this …
With this in mind, as we open 2020, following the 2019 Fed flip-flop, stocks are already off to a hot start. But it doesn’t mean we should expect things to cool down. Here’s a look at the “January effect” on the late 90s …