THE ECONOMY: As of January 2019
Rebounding off of deeply oversold conditions in late December, the S&P 500 posted its best January in 30 years, rising just over 8%. Generally positive earnings reports combined with a shift in the Federal Reserve’s outlook toward a less restrictive monetary policy spurred the gains. Also, back-to-back solid employment reports have given investors the confidence that the economic expansion remains on track. Emerging market equities were beneficiaries of Federal Reserve actions as well, up 8.77% in January.
THE ECONOMY: As of December 2018
It was a tough way to close out the year for stocks, as fears of a global slowdown heading into 2019 and the Federal Reserve tightening monetary policy too quickly weighed on markets. The S&P 500 was down 9.03%, marking it one of the worst Decembers on record. International and emerging markets held up better, falling 4.85% and 2.66%, respectively. Interest rates fell as investors looked for safety, with the 10-Year U.S. Treasury yield ending the year at 2.69%, down from above 3% a month prior.
THE ECONOMY: As of November 2018
Stock markets rallied late November on news of an ostensible trade truce between the U.S. and China after the G20 meeting in Argentina, as well as Fed Chair Jerome Powell softening his tone regarding future interest rate increases. The S&P 500 was up 2.04%, bringing its year-to-date gain to just above 5%. Emerging market equities, which are often sensitive to U.S. monetary policy, surged 4.12% during the month. The Fed is still expected to raise rates at its next meeting in December, but odds for further action in 2019 have been declining.
THE ECONOMY: As of October 2018
Volatility picked back up in a big way in October, with most major stock markets experiencing between 5 – 10% declines. There wasn’t any one reason investors could point to, but a combination of rising interest rates, potentially escalating trade tensions with China, and the upcoming midterm elections were enough to cause a wave of selling. Yet the underlying economy and corporate fundamentals, especially in the U.S., appear to be on solid footing. Third quarter GDP came in at a 3.5% annualized rate, and yearly S&P 500 earnings growth is tracking at nearly 25%.
QUARTERLY MARKET COMMENTARY : Third Quarter 2018
Last quarter, we noted that a Google Trends search for the term “trade war” hit a value of 100 in early July, which denotes peak popularity according to the firm’s model, reflective of what was arguably investors’ top concern over the first half of 2018. But how did stocks respond as fears of an impending trade war reached their peak? By rallying nearly 8% over the ensuing three months, hitting a new all-time high in the process. So, despite a seemingly daily deluge of headlines warning of imminent economic peril, investors who stayed the course were well rewarded. Markets have a funny way of doing that. And while the final resolution of various trade negotiations around the world are uncertain, the global economy remains on solid footing and corporate earnings continue to impress.
Read the Full Commentary: Third Quarter 2018
THE ECONOMY: As of September 2018
You may have missed, it given all the headlines surrounding various political distractions across the globe, but the third quarter turned out quite nicely for stock markets. The S&P 500 gained an impressive 7.71% and reached a new all-time high. International equities also posted positive performance, with the MSCI EAFE up 1.35%. Fixed income markets were relatively stable, as investors largely anticipated the Federal Reserve’s late September decision to raise its key interest rate for a third time this year.
THE ECONOMY: As of August 2018
Sell in May and go away? Not so in 2018, as U.S. stock markets have rallied strongly over the past 3 months. The S&P 500 gained 7.10% over that time period, recouping its losses from early in the year and even hitting a new all-time high. International and emerging markets have not fared as well, due to ongoing trade disputes and currency crises in Turkey and Argentina. Both the MSCI EAFE and MSCI Emerging Markets are roughly flat since May. Thanks to ongoing economic strength in the U.S., the Federal Reserve is all but certain to raise interest rates at its upcoming September meeting.
THE ECONOMY: As of July 2018
It was a strong first half for the U.S. economy with 2nd quarter GDP coming in at a 4.1% annual rate. Solid growth coupled with the boost from tax legislation are supporting another standout earnings season. Second quarter profits for large cap companies are expected to be up more than 20%. Stellar corporate performance has supported the stock market’s recent advance despite continued worries about trade policy and rising interest rates. In fact, the S&P 500 rose 3.72% last month and is just shy of January’s all-time high. International markets were better in July with the MSCI EAFE and MSCI Emerging Markets up 2.46% and 2.20%, respectively.
THE ECONOMY: As of June 2018
Despite continued stock market volatility and increasing risks surrounding trade policy, underlying economic growth in the U.S. looks solid. The Atlanta Federal Reserve is projecting just over 4% GDP growth for the 2nd quarter. Equities have slowly moved higher since their correction in February, with the S&P 500 now up a modest 2.65% year-to-date. Small cap stocks have been the standout though, rising 7.66% over the first half of 2018. The Federal Reserve raised its key federal funds rate again after its June meeting, and is projecting one to two more increases for the duration of the year.
THE ECONOMY: As of May 2018
After bouncing around between its 50 and 200-day moving average for about six weeks, the S&P 500 finally broke out of that trading range in early May. Momentum continued throughout the month with large cap stocks gaining 2.41%. Down the cap scale fared even better, with small cap equities rising an impressive 6.07%! A firming U.S. dollar and less sensitivity to global trade are often cited as catalysts for recent small stock outperformance. The aforementioned dollar strength, however, was a headwind for foreign assets. International and emerging stocks fell 2.25% and 3.54%, respectively, in May.