March – April 2019

U.S. Economic and Market Highlights

The Economy:

  • U.S. economic data continued to show a fairly healthy first-quarter with GDP at an annualized 3.2% and unemployment remaining below 4%. The current expansion period is one of the longest in modern history, but cumulative growth is still modest. 
  • The International Monetary Fund’s global growth projections have declined, since their last report in October, as Europe’s economic growth continues to slow.
  • Additional statistics signaling the potential for slower growth in the U.S. are residential real estate sales, which fell for a fifth straight quarter, and retail consumption which slowed significantly in the first quarter.
  • Inflation remains subdued with the Core Personal Consumption Expenditures (PCE) at 1.6%, which was below the Fed’s 2% target and the lowest rate since September 2017. The lack of inflation supports the Federal Reserve’s more cautious shift in monetary policy. In fact, the Fed funds futures market now predicts a 66% chance of a rate cut by the end of the year.

Equity and Fixed Income:

  • Equity investors cheered better-than-expected manufacturing data from both China and the U.S. and indications of progress being made toward a productive resolution to the trade war.
  • With a “risk-on” sentiment, investors moved from safe-haven government bonds into stocks. The effect being higher long-term yields on the U.S. 10-year Treasury Bond and a steepening yield-curve during the month of April, as the difference between 10- and 2-year yields increased.
  • Corporate bonds rallied in April outperforming other fixed income securities, including: asset-backed and mortgage-backed securities and U.S. Treasuries.
  • Equities continued to perform well in April, as the S&P 500 Index reached an all-time high and achieved the best return for a first quarter since 1998.
  • Growth (style) equities continue to outperform value, while the percentage of active managers who beat the benchmark in the first quarter grew to 66% from approximately 33% in 2018.

Other investments:

  • With modest interest rate changes in the first quarter returns on commercial real estate investments were positive, as fund managers focus on industrial and multifamily sectors and move away from office and retail properties.
  • Infrastructure investments are on the rise and expected to continue in 2019 and beyond as the need increases. Renewable energy investments are attracting a lot of attention as well as roads, airports, and other energy infrastructure projects.
  • Oil prices have been volatile and are likely to continue to be as the Trump administration plans to end waivers which allowed countries to import oil from Iran despite U.S. sanctions.

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The above was prepared for informational purposes only and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security/instrument or to participate in any trading strategy. Past performance is not indicative of future results.

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