The first quarter of 2019 proved to be a strong one. The S&P 500 posted a 13.1% gain (the highest quarterly gain since 2009), the Dow Jones Industrial Average rose by 11.15% and the Nasdaq increased by 16.5%. Bond investors in both developed and emerging markets saw three consecutive months of positive returns. Oil prices enjoyed a strong start to the year, and corporate bonds and commodities also experienced gains.1
Europe got off to a rocky start to the year, but there were still positive signs:2
- The German DAX rose by 9.2%, its best performance since the last quarter of 2016.
- The CAC-40 in France logged a 13.1% return for the first quarter, its best showing since the first quarter of 2015.
- Spain’s IBEX increased by 8.2%.
- Japan’s Nikkei 225 index posted a 6% increase for the quarter.
- China’s blue-chip CSI 300 index increased by 29% during the first quarter, making it the best-performing major stock market thus far in 2019.
The biggest surprise of the first quarter was how well the markets recovered from the precipitous drop at the end of 2018. Despite uncertainties related to the U.S. and China trade war and concerns about a slowdown in Germany, the United Kingdom, Canada, France and Italy, the recent policy response from the Federal Reserve proved to be a confidence builder for investors. The Fed acknowledged that it was unlikely to raise interest rates further this year while the European Central Bank, the Bank of Japan and the People’s Bank of China initiated moves to stimulate their economies.3
While investment sentiment remains positive and the news is good, it’s important to focus on your personal portfolio. The goal for most investors isn’t to outpace the market, but rather to achieve a return range that is on track to meet financial goals without taking undue risk. If you’d like a review of your current financial situation, please give us a call.
As for the rest of 2019, some of the indicators are pointing to the chance of a recession. JP Morgan’s global markets strategy team points out that U.S. stock markets look as if they’ve priced in a 15% chance of a recession. Further, the U.S. corporate debt markets have factored in a 10% to 25% chance and treasury markets are signaling about an 80% chance.4
However, other key indicators point to a continuing healthy U.S. economy. The nation’s gross domestic product is expected to grow between 2% and 3%, which is considered ideal; unemployment is forecast to continue at a “natural” rate; and inflation and deflation are under control.5
The banking industry is expected to see positive influences in 2019, but some analysts are predicting a slowdown in 2020. They are citing factors including the fact that fewer companies are borrowing from banks because they have more money on hand. Possible reasons include the recent tax legislation that helped U.S. corporations have more cash in their coffers; or companies may be stockpiling cash and taking on less debt as a hedge against a possible recession.6
Our firm assists retirees and pre-retirees in the creation of retirement strategies utilizing investment and insurance products. Advisory services offered through B.O.S.S. Retirement Advisors, a Registered Investment Advisory firm.. Insurance products and services offered through B.O.S.S. Retirement Solutions. Marketing materials provided by Infinity Marketing Services.
1 Ian King. Sky News. April 2, 2019. “Market strategists signal caution after strong first quarter.” https://news.sky.com/story/market-strategists-signal-caution-after-strong-first-quarter-11681559. Accessed April 1, 2019.
5 Kimberly Amadeo. The Balance. March 27, 2019. “US Economic Outlook for 2019 and Beyond.” https://www.thebalance.com/us-economic-outlook-3305669. Accessed April 9, 2019.
6 Deloitte. 2019. “2019 Banking and Capital Markets M&A Outlook.” https://www2.deloitte.com/us/en/pages/financial-services/articles/banking-securities-mergers-acquisitions-outlook.html. Accessed April 1, 2019.