What a difference a quarter makes! After one of the most disappointing quarters in recent history, the first quarter of 2019 ended up being one of the best. Most analysts say a main driver was the Federal Reserve, who went from “zero to hero” by adjusting their stance on the future of interest rates. In January the Fed made a 180-degree announcement to halt rate increases. Coupled with that, the talks of a potential trade war lessened. Both were welcome news and the markets certainly cheered. Here’s how some of the major metrics fared:
|Index||1st Quarter||1 Year|
|S&P 500 Large Cap Index||13.07%||7.33%|
|S&P Small Cap 600 Index||11.17%||0.09%|
|S&P Developed BMI International Index||11.80%||0.66%|
|S&P U.S. Aggregate Bond Index (total return)||2.50%||3.90%|
|S&P Municipal Bond Index (total return)||2.76%||5.12%|
|Dow Jones Equity All REIT Index||16.12%||15.63%|
|Dow Jones Commodity Index (spot return)||8.40%||-1.60%|
|Source: Dow Jones, data as/of 3-31-2019 (doesn’t include dividends unless noted)|
The market’s gains were widespread, but looking a little deeper, technology stocks did much of the work. The energy and real estate sectors were notably strong as well. Double digit gains were achieved for most major stock indexes, large or small, US based or international. We also saw appreciation in bonds as interest rates pulled back. WTI crude oil rebounded in a big way, going from $45 to above $60. You can view a comprehensive list of index returns here.
Jobless claims are still low, as is inflation. Housing numbers and other metrics still look solid. Several measures of consumer confidence continue to suggest that both firms and consumers are in good shape. Not that I went in to this writing trying to be optimistic, but these are the facts and the facts are fairly encouraging.
March of 2019 marked the 10 year anniversary of a strong bull market, which has been remarkable for both it’s length and rise. Investors who stayed the course (since the world was seemingly coming to an end!) have been handsomely rewarded. The S&P 500 is up over 300% since that bottom. The unemployment rate has been more than halved. Corporate profits have been hitting record highs. We’ve had Presidential changes, fluctuations in interest rates, and tensions around the globe. None of that seemed to disrupt the global economy, in part to the evolving technology.
Thanks to strides in tech, our oil production has turned around and the USA is now the world’s biggest oil producer! Apple is selling billions of iPhones. Small businesses are alive and well. Uber now makes it possible to get between places for effectively and cheaper than a taxi. Amazon is employing local drivers to deliver packages same-day. And all these things continue to drive economic growth…as well as the stock market.
Looking forward, it is certainly possible that the cyclical rise in interest rates will trigger a “normal” bear market in equities. And we cannot make an assumption that the day will not come. But for now, I believe investors would be best served by staying put and not making any knee-jerk reactions to fear.
Disclaimer: This information contains forward-looking statements about various economic trends and strategies. You are cautioned that such forward-looking statements are subject to significant business, economic and competitive uncertainties and actual results could be materially different. There are no guarantees associated with any forecast and the opinions stated here are subject to change at any time and are the opinion of the advisor. Data comes from the following sources: Census Bureau, Bureau of Labor Statistics, Bureau of Economic Analysis, the Federal Reserve Board, and Haver Analytics. Data is taken from sources generally believed to be reliable, but no guarantee is given to its accuracy.