Category: Monthly Commentary

Monthly Commentary

March Market Commentary

US stocks climbed higher in March driven by support from the Federal Reserve and continued anticipation of a US/China trade deal.  Officials from the US and China are planning a new round of talks in hopes of having an agreement in place by the end of April.  After fourth quarter earnings topped expectations, first quarter results are expected to fall 3.8% from a year earlier potentially resulting in the first earnings decline in three years.  Economic news continued to be mixed showing a cooling, but still growing economy.  The February jobs report fell well short of expectations with 20,000 new hires, however the unemployment rate dropped to 3.8%, and wages grew 3.4%, the fastest pace in nearly decade.  Manufacturing declined more than expected, household spending rose less than expected, and fourth quarter Gross Domestic Product rose 2.2%, less than estimated.  On the positive side, new home and previously owned homes sales jumped, inflation remains subdued, and consumer sentiment rose.  Oil finished the quarter at $60 a barrel, up 32% for the quarter, for its biggest quarterly gain since 2009.  In March, US stocks gained 1.46% and have soared 14.04% for the quarter.

Foreign stocks gained over the month on supportive moves by central banks as well as US/China trade optimism.  Industrial output and exports in China both fell well short of expectations and factory output in the eurozone fell at its fastest pace in six years.  Due to the weak economic backdrop, the European Central Bank (ECB) revealed a surprise stimulus plan.  The ECB said it would keep interest rates at their current levels at least through the end of this year after previously estimating they would raise rates at the end of the summer.  It will also issue new inexpensive long-term loans starting in September.  The central banks in Canada, Japan, and Australia kept their key interest rates steady after officials expressed concerns about growth.   The British Parliament rejected Prime Minister May’s Brexit deal a third time on the day Britain was originally expected to leave the European Union.  The next steps are up in the air, but Britain is expected to request a second extension past the current April 12th deadline.  Emerging markets outpaced developed markets in March, but slightly trailed developed markets over the first quarter.  International stocks were up 0.68% in March and have climbed 10.26% for the year to date.

Bonds surged over the month as interest rates fell driven by global growth worries.  At the conclusion of the Fed’s March meeting they announced they would not raise the Fed Funds rate and are unlikely to do so this year over concerns about slowing US growth.  They may be near the end of the current interest rate raising cycle that began over three years ago.  They will begin slowing the reduction of their bond portfolio in May and end the runoff at the end of September.  The Fed Funds rate is currently set at a range of 2.25% to 2.5%.  The 10-year Treasury yield sank over the month to end at 2.41% down from 2.73% to start the month and 2.68% to start the year.  The yield curve inverted for the first time since 2007 as well.  For the month and quarter, credit and muni bonds were the top performing sectors and longer-term bonds topped shorter-term bonds.  The broad bond market jumped 1.92% in March and gained 2.94% in the first quarter.


Index Performance  March1QTrl. 1 Yr.
US Stock (Russell 3000) 1.46%14.04%8.77%
Foreign Stock (FTSE AW ex US) 0.68%10.26%-3.94%
Total US Bond Mkt. (BarCap Aggregate)1.92%2.94%4.48%
Short US Gov. Bonds (BarCap Gov 1-5 Yr)0.86%1.22%3.17%
Municipal Bonds (BarCap 1-10yr Muni)0.88%2.21%4.63%
Cash (ICE ML 3Month T-Bill)0.22%0.60%2.12%

February Market Commentary

US stocks continued to bounce back from the end of last year as investors were buoyed by optimism over a US/China trade deal, a more accommodative Fed, and solid corporate earnings. Due to progress in negotiations, President Trump announced an extension to the March 1st deadline when new tariffs were to kick in on Chinese goods .  With nearly all S&P 500 companies reporting 4th quarter results, earnings are up 13% from a year earlier, well outpacing expectations.  Economic news was mixed, but still pointed to the US being in a solid position.  The January jobs report blew away expectations with 304,000 new hires, which marked the 100th straight month of job gains.  The unemployment rate ticked up to 4.0%, but was driven by the government shutdown.  Inflation remains flat and 4th quarter Gross Domestic Product grew 2.6%, which was better than expected.  However, US retail sales sank 1.2% in December, business investment declined, existing home sales fell for the third straight month, and home prices grew at their slowest pace in four years.  In February, US stocks jumped 3.52% and have surged 12.40% for the year to date.

Foreign stocks gained over the month on US/China trade optimism and corporate earnings.  To date,  4th quarter revenue for European companies has topped estimates.  However, economic news from Europe continues to show a slowing economy.  In Germany, factory orders fell unexpectedly, and industrial production fell short of expectations.  Eurozone manufacturing had its first downturn since 2013.  Because of recent weakness, the European Commission cut its forecast for eurozone growth in 2019 to 1.3% down from the projected 1.9% in November.  The Bank of England held interest rates steady at its most recent meeting as the future of the UK remains up in the air.   The next vote on a Brexit deal is expected to be in Mid-March, but still looks unlikely to pass and the potential for a new vote to possibly reverse the original vote is a possibility.  Emerging markets trailed developed markets over the month.  International stocks gained 1.91% in February and have climbed 9.52% so far in 2019.

Bonds were relatively flat over the month as interest rates edged up.  In testimony before Congress, Fed chief Powell reiterated plans for the central bank to take a slow and steady approach.  Minutes from the Fed’s January meeting showed most officials were ready to end the reduction of its $4 trillion bond portfolio this year.  They also debated whether they should hold tight at the current Fed Funds rate or consider another increase this year.  The 10-year Treasury yield rose over the month to end at 2.73% up from 2.63% to start February.  For the month, credit and muni bonds were the top performing sectors and shorter-term bonds topped longer-term bonds.  The broad bond market edged down 0.06% in February but is up 1.00% for the year to date.

Index Performance  Feb.YTDTrl. 1 Yr.
US Stock (Russell 3000) 3.52%12.40%5.05%
Foreign Stock (FTSE AW ex US) 1.91%9.52%  -6.22%
Total US Bond Mkt. (BarCap Aggregate)   -0.06% 1.00%3.17%
Short US Gov. Bonds (BarCap Gov 1-5 Yr) 0.03%0.36%2.61%
Municipal Bonds (BarCap 1-10yr Muni) 0.45%  1.31%3.80%
Cash (ICE ML 3Month T-Bill) 0.18% 0.38%2.04%

January Market Commentary

US stocks had their best January in over 30 years driven by renewed faith in the US economy, strong corporate earnings and by a dovish Fed.  After investors feared a significant slowdown in earnings growth, companies in the S&P 500 have reported a 12% increase in 4th quarter profits compared to a year earlier, ahead of expectations.  Fed Chairmen Powell stated in multiple speeches that the Fed would be patient with any changes in monetary policy.  Economic news reassured investors over the month with the December jobs report showing 312,000 new hires, well outpacing expectations.  Wage growth rose 3.2% from a year earlier and past jobs reports were revised higher by 58,000 new hires. Inflation rose by less than 2% in December, compared to a year earlier, providing consumers more real earnings growth. However, US manufacturing, auto sales and home sales all cooled in December.  Oil rebounded with equities, gaining 18% over the month.  In January, US stocks soared, gaining 8.58%.  However, over the trailing twelve months stocks are down 2.26%.

Foreign stocks surged over the month, more than bouncing back from their December declines, aided by US economic news, stimulative measures in China and the European Central Bank (ECB) leaving open the possibility of additional stimulus measures.  Chinese manufacturing contracted for the first time since May 2017 and China’s GDP growth in 2018 was 6.6%, its slowest pace of growth since 1990. As a result, China’s central bank added roughly $38 billion to the country’s large and mid-size banks to boost lending and help the economy.  In Europe, manufacturing was its weakest in more than a year, Germany and France’s GDPs both grew 1.5% in 2018 down from 2.2% and 2.3%, respectively, from 2017 and Germany’s business sentiment fell sharply.  The ECB acknowledged that Europe’s outlook had weakened since December and said it could consider additional stimulus measures if needed.  UK’s Parliament overwhelming voted against the latest version of the Brexit deal brought by Prime Minister May, bringing into question what the country will do with an end of March deadline.  Emerging markets topped developed markets over the month.  International stocks jumped 7.46% in January, but are down 12.25% over the trailing year.

Bonds continued their recent climb driven by the Fed’s change in stance.  After raising the Fed Funds rate a quarter percent at their December meeting and projecting two interest rate increases in 2019, they changed tack in their January meeting saying they would be flexible with policy moving forward. They also announced they would be keeping more bonds on their balance sheet than they had expected to when they started unwinding the portfolio – a stimulative move for the economy.  The 10-year Treasury yield declined over the month to end at 2.63%.  For the month, credit bonds were the top performing sector and longer-term bonds topped shorter-term bonds.  The broad bond market gained 1.06% in January and is up 2.25% over the trailing twelve months.

Index Performance  Jan.Trl. 1 Yr.
US Stock (Russell 3000) 8.58%-2.26%
Foreign Stock (FTSE AW ex US) 7.46% -12.25%
Total US Bond Mkt. (BarCap Aggregate)  1.06%2.25%
Short US Gov. Bonds (BarCap Gov 1-5 Yr)  0.32%2.44%
Municipal Bonds (BarCap 1-10yr Muni) 0.86%3.11%
Cash (ICE ML 3Month T-Bill) 0.20%1.95%

December Market Commentary

US stocks dropped again in December nearing bear market territory before rebounding partially to end the month.  It was the worst year for US stocks since the financial crisis.  Fears of slowing global growth dominated investors’ minds over the month.  Also weighing on stocks were the future moves of the Fed, the trade squabble with China and US government shutdown.  Economic news is still generally solid, but it has cooled since earlier in the year.  The November jobs report showed 155,000 new hires, slightly below expectations and wage gains held at 3.1%. US retailers posted one of the best holiday shopping seasons in years with sales rising 5.1% over last year and consumer spending increased for the 9th straight month.  However, durable goods orders fell for a third straight month, consumer confidence fell for a second straight month and home price growth was flat.  Oil ended the year at $45.51 a barrel despite an agreement from OPEC members and Russia to cut production by 1.2 million barrels a day.  Oil fell 25% over the year.  In December, US stocks plunged, falling 9.31% and 14.30% for the fourth quarter.  For the year, US stocks were down 5.24%.

Foreign stocks fell over the month on global growth fears, but held up better than US stocks.  China and the US agreed to postpone an increase in tariffs for 90 days to allow for further negotiations to a deal, however the nations still remain far apart. The European Central Bank announced it was ending its bond purchase program, lowered its forecast for growth by 0.1% for 2019 and 2020 and said they would hold on to their bond portfolio for “an extended period of time.” Industrial production in China in November slowed more than expected and retail sales growth fell by the most in over 15 years. French business production contracted for the first time in two and a half years and Germany’s Purchasing Managers Index reached its lowest level in four years.  UK Prime Minister May postponed a vote in parliament of her Brexit agreement and vowed to go back to the negotiating table to work out a deal that might have a chance of passing.  Emerging markets topped developed markets in December and the fourth quarter, however developed markets outpaced for the full year.  International stocks sank 4.48% in December and 11.44% for the quarter.  Over 2018 international stocks declined 13.87%.

Bonds surged in December as investors flocked to safe havens on a substantial increase in concern for global growth.  At the Fed’s December meeting they voted to raise the Fed Funds rate a quarter percent to a range of 2.25% to 2.5%.  They also lowered their growth outlook for 2019 from 2.5% to 2.3%. In comments after the meeting Chairman Powell suggested the Fed would target two interest rate increases in 2019.  The 10-year Treasury yield ended the year at 2.69%, its lowest level since the end of January, down from 3.01% to start the month, but up from 2.40% at the start of 2018.  For the month and quarter, Treasury bonds were the top performing sector and longer-term bonds topped shorter-term bonds.  For the year, Agency, Municipal and International bonds were the top performing sectors and shorter-term bonds topped longer-term bonds.  The broad bond market gained 1.84% in December and 1.64% in the fourth quarter. For the year, bonds were flat edging up 0.01%.


Index Performance  Dec.4QYTD
US Stock (Russell 3000) -9.31%-14.30%-5.24%
Foreign Stock (FTSE AW ex US) -4.48%-11.44%-13.87%
Total US Bond Mkt. (BarCap Aggregate)  1.84%1.64%  0.01%
Short US Gov. Bonds (BarCap Gov 1-5 Yr)  1.12%1.74%  1.53%
Municipal Bonds (BarCap 1-10yr Muni) 0.99%1.61%  1.64%
Cash (ICE ML 3Month T-Bill) 0.18%0.56% 1.87%

November Market Commentary

US stocks rebounded in November after receiving a boost from mid-term election results and comments by the Federal Reserve Chairman that led investors to believe the Fed might ease their pace of interest rate hikes.  Economic news was generally positive with 250,000 new hires in October, which well surpassed expectations, wages gained 3.1%, their largest gain in nearly a decade, retail spending jumped 0.8%, inflation remained below the Fed’s target rate and consumer confidence remained high.  However, two significant areas of the economy, auto sales and housing, have trended down. Existing home sales fell 5.1% from a year earlier and auto sales fell roughly 2% in October, both impacted by higher interest rates.  Oil continued to plunge in November, falling 22% over the month, ending at $50.93 a barrel.  It was the worst one-month loss since October 2008.  In November, US stocks rose 2.00% bringing the year to date return to 4.48%.

Foreign stocks gained over the month on the potential for a more accommodative Fed and reduced trade tensions.  Recent data has shown that global economic growth has slowed.  In the third quarter, Japan’s Gross Domestic Product (GDP) contracted 1.2%, while Germany’s GDP contracted 0.8%, for the first quarterly drop in three and a half years.  The European Central Bank plans to move forward with ending its bond buying program at the end of the year despite the weakening growth trend in the European Union (EU).  Consumer spending in China hit its lowest pace in five months.  The UK and EU were able to reach a draft deal to allow the UK’s exit from the Eurozone and EU leaders approved the deal, but many hurdles remain, particularly in the UK, before approval.  The US and China reopened trade talks in hopes of curbing the escalating trade war.  Emerging markets well outpaced developed markets for the month.  International stocks rose 0.95% in November but are still down 9.83% for the year to date.

Bonds rose in November as interest rates eased.  The interest rate decline was driven by concerns about global growth and comments made by Fed Chairman Powell.  In a speech he said the Fed Funds Rate was “just below” a neutral level easing investor worries that the Fed would continue to raise the Fed Funds rate aggressively.  At the Fed’s November meeting they made no changes to the Fed Funds Rate, gave a positive outlook on the economy and strongly hinted at a December rate hike.  They also expect to raise rates between two and four times in 2019.  The 10-year Treasury yield ended the month at 3.01% falling from 3.15% to start the month.  The 10-year yield is at its lowest level since mid-September.  For the month, Municipal and Treasury bonds were the top performing sectors and longer-term bonds topped shorter-term bonds.  The broad bond market gained 0.60% in November raising the year to date performance to -1.79%.


Index Performance  Nov.YTDTrl 1 Yr
US Stock (Russell 3000) 2.00%4.48%   5.53%
Foreign Stock (FTSE AW ex US) 0.95%-9.83%  -7.71%
Total US Bond Mkt. (BarCap Aggregate)0.60%-1.79%  -1.34%
Short US Gov. Bonds (BarCap Gov 1-5 Yr) 0.49% 0.40%   0.39%
Municipal Bonds (BarCap 1-10yr Muni) 0.88% 0.64%    1.28%
Cash (ICE ML 3Month T-Bill) 0.21% 1.69%    1.80%