Category: Monthly Commentary

Monthly Commentary

February Market Commentary

US stocks sank, posting their worst month since 2009, on concerns over the economic impact of the spread of the coronavirus. After first being mostly contained to China it became evident over the second half of the month that it was spreading globally and would have a significant impact on consumers and business operations. With the vast majority of S&P 500 companies reporting fourth quarter earnings, 70% have beaten expectations. However, many companies have lowered earnings outlooks for the year over impacts from the virus. Economic news was relatively positive over the month, though it had yet to reflect much impact from the coronavirus. US hiring remained strong with 225,00 new hires in January. The unemployment rate ticked up to 3.6%, but it was a result of more people entering the workforce. Retail sales rose and consumer sentiment climbed. Manufacturing unexpectedly improved expanding for the first time since July. On the downside home sales fell by 1.3% in January. Oil descended 13.2% over the month to finish at $44.76 a barrel. In February, US stocks dropped 8.19% and are down 8.29% over the year to date.

Foreign stocks fell as well in February weighed down by the potential impact from the coronavirus. As part of its pledge to deliver on the purchase of US goods, China said it would cut tariffs on $75 billion worth of US goods in half from 10% to 5% and for other goods from 5% to 2.5%. China also launched fresh stimulus measures to support its economy. The government is planning to step in to help businesses adjust their supply chains given the work stoppages that have occurred in the country. Japan’s GDP growth contracted 6.3% in the fourth quarter much worse than the 3.9% contraction projected. The decline was driven by an increase to the national sales tax. The country could enter into a recession if there isn’t a substantial improvement in the coronavirus hampered first quarter. Industrial activity eased in Germany, France, and Spain in December. Emerging markets topped developed markets in February and over the year to date. Foreign stocks dropped 7.93% in February and have declined 10.43% for the year to date.

Bonds continued to surge in February as investors rushed to safe havens over fears of the pace of global growth. In testimony before Congress earlier in the month, Fed Chief Powell said they were watching the impacts of the coronavirus carefully, but the Fed planned to continue its wait and see approach to policy changes in the Fed’s benchmark rate. After seeing significant stock market declines to end the month Powell made a surprise statement that the Fed was ready to cut the Fed Funds Rate to help support the US economy. The 10-year Treasury yield ended the month at 1.13%, down from 1.52% to start the month, a record low. For the month, longer term bonds outperformed shorter term bonds and government bonds were the top performing sector. In February, the US bond market jumped 1.41% and is now up 2.85% for the year.


Index Performance  Feb.YTDTrl. 1 Yr.
US Stock (Russell 3000)-8.19%-8.29%6.90%
Foreign Stock (FTSE AW ex US)-7.93%-10.43%-0.06%
US Bond Mkt. (BarCap Int. Gov/Credit)1.41%2.85%8.81%
Municipal Bonds (BarCap 1-10yr Muni)0.63%1.80%5.78%
Cash (ICE ML 3Month T-Bill)0.13%0.26%2.09%


January Market Commentary

US stocks climbed over the first half of the month on optimism about global growth, but fell over the second half on concerns over the coronavirus outbreak. Investors feared the virus would slow the world economy and in turn negatively impact corporate earnings. Corporate earnings for the fourth quarter have been strong to date with 70% of S&P 500 companies who have reported earnings posting results that have beaten expectations. Economic news remained positive in January. US employers added jobs for a 10th straight year in 2019. December payrolls increased 145,000, slightly below estimates, but the unemployment rate remained at 3.5%. Retail spending rose 0.5% in December, the best pace in five months and business activity reached a ten-month high. New home construction rose to the highest level since 2006 and existing home sales reached their highest level of the year in December. The US economy grew at a 2.1% pace in the fourth quarter resulting in a 2.3% pace for 2019. The rate of growth is relatively in line with the levels seen since the current expansion began in 2009. On the downside, manufacturing continued to weaken with the December reading of manufacturing activity the lowest since 2009. In January, US stocks ticked down 0.11%, but have gained 20.53% over the trailing year.

Foreign stocks followed a similar path as US stocks in January, but dropped further on fears over the coronavirus. China’s central bank announced it would reduce the required amount banks would need to hold in reserve, a supportive move for the economy. Chinese industrial production grew 6.9% in December outpacing estimates for the fastest expansion in nine months, while economic growth eased to 6.1% for 2019 in line with expectations. Germany’s growth hit a six-year low of 0.6% in 2019 dragged down from weakness in the manufacturing sector. After their most recent meeting the European Central Bank elected to keep their benchmark interest rate at its current level and said there will likely be negative interest rates for some time. Similarly, the Bank of England elected to keep its benchmark rate steady at its most recent meeting. The UK finally left the EU at the end of January and now enters into a transition period where it will negotiate the details of its future relationship with the EU. Emerging markets trailed developed markets in January and over the trailing year. Foreign stocks dropped 2.72% in January, but are up 10.62% over the trailing year.

Bonds jumped to start 2020 as investors flocked to safe haven investments on global growth concerns. The Fed made no changes to its benchmark interest rate at the conclusion of its January meeting stating they are “comfortable with (their) current policy stance.” The 10-year Treasury yield ended the month at 1.52%, down from 1.92% to start the month, its lowest level since early September. For the month, longer term bonds outperformed shorter term bonds and government bonds was the top performing sector. The US bond market surged 1.42% in January and is up 7.39% over the trailing year.


Index Performance  Jan.Trl. 1 Yr.
US Stock (Russell 3000)-0.11%20.53%
Foreign Stock (FTSE AW ex US)-2.72%10.62%
US Bond Mkt. (BarCap Int. Gov/Credit)1.42%7.39%
Municipal Bonds (BarCap 1-10yr Muni)1.17%5.59%
Cash (ICE ML 3Month T-Bill)0.13%2.22%


December Market Commentary

US stocks finished the year strong, reaching new record highs and posting the best year since 2013 on positive US/China trade developments and encouraging economic news.  President Trump announced he would sign a phase one trade deal with China in mid-January.  The deal will reduce existing tariffs on Chinese goods and canceled new tariffs that would have taken effect during the month, while China will increase purchases of US farm goods by $32 billion, increase intellectual property protection, open the Chinese financial services market and prevent currency manipulation.  The US will cut the tariff rate on roughly $120 billion of Chinese goods from 15% to 7.5%.  In addition, the President and Congress agreed on a trade deal between the US, Canada, and Mexico setting up passage in early 2020.  Economic news continued to be solid in December.  Hiring in November blew past expectations with 266,000 new hires and previous months’ hires were revised up by 41,000. The unemployment rate also declined to 3.5% and wage growth edged up to 3.1%.  Retail spending from November 1st through Christmas Eve rose 3.4% from last year. Business activity reached a five-month high and consumer sentiment rose in December.  On the downside, in November US manufacturing activity moved further into contraction territory.  In December, US stocks rose 2.89% and surged 9.10% over the fourth quarter.  For the year, US stocks posted a 31.02% gain.

Foreign stocks climbed over the month on US/China trade talks and more clarity around Brexit to post a strong bounce-back a year from 2018.   In addition to reaching a phase one deal with the US, China said it would cut tariffs as of January 1st with all trading partners on a range of goods. Manufacturing and consumer spending both improved in China in November as well. Japan approved a $120 billion stimulus plan, its most significant stimulus measure in over three years.  In the eurozone, manufacturing activity contracted less than expected in November.  The European Central Bank held its benchmark rate steady after new chief Lagarde’s first meeting as she detected “some initial signs of stabilization” in eurozone growth.  Prime Minister Johnson’s snap election in Britain resulted in a solid majority for his party in Parliament clearing the way for the UK to leave the EU on January 31st. OPEC agreed to cut crude oil output by roughly 40% next year as it pushed for higher prices.  Emerging markets topped developed markets for the month and fourth quarter but trailed developed markets for the year.  Foreign stocks were up 4.35% in December and climbed 9.10% in the fourth quarter.  Over 2019 foreign stocks surged 22.20%.

Bonds edged up slightly to end the year as interest rates rebounded from their lows for the year. However, over 2019 interest rates dropped significantly driven by the Fed’s policy reversal.  After raising the Fed Funds rate four times in 2018, the Fed switched gears and made three quarter percent interest rate cuts in 2019 to cushion the US economy from slowing global growth.  At their last meeting of the year, the Fed announced that they were holding rates steady for the time being.  The rate-setting body currently expects to leave the Fed Funds rate unchanged in 2020.  The 10-year Treasury yield ended the year at 1.92%, up from 1.78% to start the month, but down substantially from the 2.69% where it started the year.  For the month and quarter, shorter-term bonds generally outperformed longer-term bonds, while longer-term bonds outpaced shorter-term bonds over 2019. Credit and Muni bonds were the top-performing sectors for the month and fourth quarter, while credit bonds were the top performer for the year to date.  The US bond market edged up 0.13% in December and 0.37% over the fourth quarter.  For the year, bonds gained 6.80%.


Index Performance  Dec.4QYTD
US Stock (Russell 3000)2.89%9.10%31.02%
Foreign Stock (FTSE AW ex US)4.35%9.10%22.20%
US Bond Mkt. (BarCap Int. Gov/Credit)0.13%0.37%6.80%
Municipal Bonds (BarCap 1-10yr Muni)0.30%0.86%5.63%
Cash (ICE ML 3Month T-Bill)0.14%0.44%2.21%


November Market Commentary

US stocks continued to reach new record highs in November aided by positive economic news, strong corporate earnings, and optimism over the direction of US/China trade talks. With nearly all S&P 500 firms reporting earnings for the third quarter, 75% of firms have reported earnings that beat expectations and earnings overall declined 0.4%, outpacing the 4.6% expected. Economic news remained generally positive in November. Hiring in October topped expectations with 128,000 new hires, despite the GM strike, and August and September hiring was revised up. The unemployment rate ticked up to 3.6% from 3.5% as more individuals joined the workforce. Retail sales grew 0.3%, and durable goods orders rose more than expected in October. US consumer sentiment rose, and business activity reached a reading at a fourth month high in November. Third-quarter GDP was revised up to 2.1% from 1.9%. In November, US stocks surged 3.80% taking the year to date return to 27.34%.

Foreign stocks rose over the month on encouraging economic and trade news. Economic growth in the European Union edged up slightly in the third quarter to 0.9% from 0.8%. Germany edged up as well, growing 0.3% in the third quarter. Japan, however, slowed significantly to 0.2% from 1.8% in the second quarter. China’s Commerce Ministry issued a statement saying the US and China trade negotiators “reached a consensus on properly solving related issues,” upbeat language that progress was being made in trade talks. A measure of Chinese factory activity unexpectedly expanded in November after six months of contraction. Emerging markets trailed developed markets for the month and year to date. Foreign stocks rose 0.93% in November and have climbed 17.10% for the year to date.

Bonds edged down over the month as interest rates rose slightly. Investors grew more optimistic about the global economy and the direction of trade talks and moved away from safe-haven assets. In minutes from the Fed’s October meeting, they offered few clues about their next move focusing more on a wait and see approach as they evaluated global growth and trade and their impact on the US. In testimony on Capitol Hill, Fed Chief Powell said he didn’t see any immediate need to adjust interest rate policy but was open to reassessing with new data. The 10-year Treasury yield rose slightly over the month to finish at 1.78%, up from 1.69% to start the month. For the month, generally, shorter-term bonds outpaced longer-term bonds and credit and muni bonds were the top-performing sectors. The US bond market ticked down 0.15% in November but is up 6.67% for the year to date.


Index Performance  Nov.YTDTrl. 1 Yr.
US Stock (Russell 3000)3.80%27.34%15.49%
Foreign Stock (FTSE AW ex-US)0.93%17.10%11.85%
US Bond Mkt. (BarCap Int. Gov/Credit)-0.15%6.67%8.09%
Municipal Bonds (BarCap 1-10yr Muni)0.23%5.31%6.35%
Cash (ICE ML 3Month T-Bill)0.12%2.13%2.32%


October Market Commentary

US stocks touched new record highs in October driven by positive trade news, better than expected corporate earnings and encouraging economic news.  The US and China held trade talks in Washington during the month and President Trump announced the US and China had reached a “Phase One deal” on trade.  The US agreed to not implement tariffs set to go into effect in October and China will increase its purchases of US agricultural goods.  While earnings are set to decline for a third straight quarter, 75% of the 342 S&P 500 companies that have reported earnings to date have beaten expectations.  Economic news reflected a resilient US economy. Employers added 136,000 employees in September, slightly below expectations, but August and July hiring numbers were revised higher. The unemployment rate reached a half-century low of 3.5%.  US consumer sentiment rose in early October and US economic growth rose 1.9% in the third quarter, a slightly slower pace than the second quarter, but better than the 1.6% expected by economists.  On the downside, manufacturing contracted for a second straight month, auto sales fell 1.4% over the first nine months of the year and retail sales fell 0.3% for the first monthly decline since February.  In October, US stocks climbed 2.15% bringing the year to date performance to 22.68%.

Foreign stocks were again the top-performing asset class in October driven by supportive central banks and hopes over US/China trade discussions.  Purchasing manager surveys pointed to a continued slowdown in manufacturing activity in Europe and Asia. Eurozone investor confidence fell to a six-year low.  After the stimulus plans outlined at their September meeting, the European Central Bank elected to not make any policy changes at its October meeting.  However, three developed and nine emerging market countries central banks cut interest rates during the month.   China’s third-quarter GDP growth slowed to 6%, a 26 year low.  It’s at a low level of the range targeted by the Chinese government.  Negotiators from the UK and EU were able to reach a deal on the UK’s exit from the country bloc, however, the agreement has yet to pass Parliament.  As a result, EU leaders agreed to a three-month extension of the Brexit deadline to 1/31/20.  Emerging markets outpaced developed markets for the month, but trail over 2019.  Foreign stocks rose 3.59% in October and have surged 16.03% for the year to date.

Bonds gained over the month as interest rates held steady. Minutes from the Fed’s September meeting showed officials became increasingly concerned that slowing global growth could more significantly slow US hiring and economic activity.  They cited muted inflation, trade policy uncertainty and weak global growth for support on cutting their benchmark interest rate at that meeting.  At the Fed’s October meeting they elected to cut the Fed Funds Rate by 0.25% for the third time in as many meetings.  The Fed now targets a range of 1.5%-1.75% for its benchmark interest rate.  They also said that they would not reduce the rate further unless there was a clear deterioration of the economy.  The 10-year Treasury yield rose and then declined over the month to finish flat at 1.69%.  For the month, generally, shorter-term bonds outpaced longer-term bonds and credit bonds were the top-performing sectors.  The broad bond market rose 0.30% in October and is up 8.85% for the year to date.


Index Performance  Oct.YTDTrl. 1 Yr.
US Stock (Russell 3000)2.15%22.68%13.49%
Foreign Stock (FTSE AW ex-US)3.59%16.03%11.88%
Total US Bond Mkt. (BarCap Aggregate)0.30%8.85%11.51%
Short US Gov. Bonds (BarCap Gov 1-5 Yr)0.32%4.21%5.89%
Municipal Bonds (BarCap 1-10 Yr Muni)0.32%5.07%7.04%
Cash (ICE ML 3 Month T-Bill)0.19%2.01%2.40%