Category: Monthly Commentary

Monthly Commentary

July Market Commentary

US stocks rose in July supported by the Federal Reserve (Fed) and better than expected corporate earnings.  Comments made by Fed Open Market Committee members during the month nearly guaranteed an interest rate cut at the Fed’s July meeting, which the Fed delivered on to close out the month. With 45% of S&P 500 companies reporting earnings to date, 80% have posted better than expected results. Analysts now expect a 2.5% contraction in earnings for the quarter, better than the expected 3.0%.  Trump and Chinese leader Xi Jinping met after the G-20 summit and got trade talks restarted with the leaders agreeing to hold off on additional tariffs at the time. Economic news was once again mixed.  There were 224,000 new hires in June, topping expectations and more individuals began looking for work, a positive sign for the economy. Consumer confidence hit its highest reading of the year, and the first reading of second-quarter Gross Domestic Product (GDP) showed the economy grew at a better than expected 2.1%.  On the downside, manufacturing, auto sales, and home sales all have posted multiple months in a row of declines.  In July, US stocks climbed 1.49% and are now up 20.48% for the year.

Foreign stocks fell over the month driven by generally weak economic news.  The eurozone economy grew at a 0.8% rate in the second quarter, a steep slow down from 1.8% growth in the first quarter.  Manufacturing confidence fell to its lowest level in six years.  The European Central Bank said it will be cutting short term interest rates for the first time since 2016 and restarting its bond-buying program.  It said it expected to keep its key interest rate at -0.4% or lower through the first half of 2020.  The changes are expected to be announced at their next policy meeting in September.  The UK’s ruling conservative party voted strong Brexit supporter Boris Johnson to become the next Prime Minister. This sets up the possibility of the UK leaving the European Union (EU) without an agreement in place between the two, potentially creating significant trade and governmental disruptions.  China posted its slowest pace of growth since 1992, falling short of expectations with a second-quarter GDP of 6.2%.  Emerging markets were in line with developed markets in July but have trailed over the year to date.  Foreign stocks fell 1.14% in July but are up 12.42% for the year to date.

Bonds edged up in July as it became clear the Fed planned on cutting the Fed Funds rate.  The Fed cut the Fed Funds rate by a quarter percentage point at their July meeting for the first interest rate cut since 2008.  The move was made to help cushion the US economy from growing global economic weakness.  The target rate is now between 2.0% and 2.25%.  The Fed also announced it would end the runoff of its $3.8 trillion bond portfolio two months earlier than expected, a supportive move for the economy.  However, investors were disappointed in comments made by Fed Chair Powell as he did not allude to any further rate cuts later in the year.  The 10-year Treasury yield was flat over the month ending at 2.02%.  For the month, credit and municipal bonds were the top-performing sectors and longer-term bonds outpaced shorter-term bonds.  The broad bond market gained 0.22% in July, bringing their year to date return to 6.35%.


Index Performance  JulyYTDTrl. 1 Yr.
US Stock (Russell 3000)1.49%20.48%7.05%
Foreign Stock (FTSE AW ex US)-1.14%12.42%-1.96%
Total US Bond Mkt. (BarCap Aggregate)0.22%6.35%8.08%
Short US Gov. Bonds (BarCap Gov 1-5 Yr)-0.17%2.91%4.86%
Municipal Bonds (BarCap 1-10yr Muni)0.74%4.65%5.90%
Cash (ICE ML 3Month T-Bill)0.18%1.40%2.31%

June Market Commentary

US stocks climbed in June, hitting new record highs, and had the best first half of a year since 1997.  The gains were driven by expectations that the Fed and other central banks will ease monetary policy.  Comments from Fed Chair Powell showed that a cut from the current Fed Funds target of 2.25% to 2.5% was likely if trade policy negatively impacted the economy.  The US and Mexico reached a deal to avoid the implementation of tariffs threatened by President Trump.  Economic news pointed to an economy still growing, but slowing down. The May unemployment report fell well short of expectations with 75,000 new hires and April and March’s hiring was revised down. The unemployment rate held at 3.6% and wage growth remained at 3.1%.  US factory activity posted its lowest reading since October 2016, retail sales rose less than expected, consumer confidence fell to its lowest level since September 2017 and inflation remained muted.  In June, US stocks soared, gaining 7.02%, bringing the second quarter and year to date returns to 4.10% and 18.71%, respectively.

Foreign stocks bounced back in June driven by more accommodative central banks.  A eurozone manufacturing survey showed manufacturers were at their most downbeat since September 2013.  The European Economic Sentiment Indicator was at its lowest since August 2016 and German business sentiment hit its lowest level since 2014. The European Central Bank (ECB) said at the end of their June meeting they were not making any benchmark rate adjustments until at least the second half of 2020 and opened the door to a possible rate cut – a significant change in policy. Later in the month, ECB President Draghi said the central bank could roll out fresh stimulus as soon as July.  China’s manufacturing fell sharply into contraction territory in May. The Chinese government said it would accelerate the funding of infrastructure projects, injecting fresh stimulus for the country’s economy.  Emerging markets outpaced developed markets in June, but trailed over the second quarter and year to date.  Foreign stocks jumped 5.91% in June and are now up 3.13% and 13.72% for the second quarter and year to date, respectively.

Bonds moved higher in June as interest rates continued to ease.  The Federal Reserve held the Fed Funds Rate steady after its June meeting, however, comments by the interest rate-setting body led investors to strongly believe an interest rate cut was coming later this year if trade uncertainties do not improve and the economy softens further.  The 10-year Treasury yield dropped to finish the month at 2.00% down from 2.14% at the beginning of June and 2.69% to start the year. It ended the month at its lowest level since November 2016.  For the month, quarter and year to date, longer-term bonds outpaced shorter-term bonds and credit bonds were the top-performing sector.  The broad bond market rose 1.26% in June and 3.08% for the second quarter.  For the year to date, bonds have surged 6.11%.


Index Performance  June2QYTDTrl. 1 Yr.
US Stock (Russell 3000)7.02%4.10%18.71%8.98%
Foreign Stock (FTSE AW ex-US)5.91% 3.13%13.72%1.65%
Total US Bond Mkt. (BarCap Aggregate)1.26%3.08%6.11%7.87%
Short US Gov. Bonds (BarCap Gov 1-5 Yr)0.66%1.85%3.09%4.94%
Municipal Bonds (BarCap 1-10yr Muni)0.43%1.64%3.88%5.49%
Cash (ICE ML 3Month T-Bill)0.20%0.62%1.22%2.28%

May Market Commentary

US stocks sank in May on global trade tensions.  After being dissatisfied with current negotiations, President Trump announced the US would raise tariffs on $200 billion of Chinese goods to 25% from the previous 10% level.  He also said he would impose levies of 25% this summer on $325 billion of Chinese goods that have yet to be taxed.  In addition, he signed an executive order that would ban telecommunications equipment from “foreign adversaries.”  The move would significantly impact several Chinese companies.  Finally, Trump threatened 5% tariffs on all Mexican goods beginning June 10th that would grow to 25% in October if the country doesn’t do more to stop the flow of immigrants into the US.  With nearly all S&P 500 companies reporting first quarter earnings results, 76% have beat analysts’ forecasts, and profit contracted 0.4% from a year earlier, less than the 4% analysts had expected.  Economic news was mixed over the month with 253,000 new hires in April and the unemployment rate dropping to 3.6%, its the lowest level since 1969. Both readings topped expectations.  Consumer sentiment reached its highest level since 2004.  On the downside, factory activity eased, retail sales fell, existing home sales posted their 14th straight month of annual declines, durable goods orders plunged and first quarter Gross Domestic Product (GDP) was revised down from 3.2% to 3.1%.  Oil prices fell 16.3% in May to their lowest level in three months, ending at $53.50 a barrel.  In May, US stocks plunged 6.47%, but are still up 10.92% for the year to date.

Foreign stocks slumped as trade worries dominated.  China retaliated against US tariffs with plans to increase tariffs on $60 billion of US goods.  Data showed that retail sales, fixed asset investment and industrial production all cooled in China in April.  An engine of growth for much of the recent expansion, Germany only grew at 0.4% pace in the first quarter.  At the end of the month yields on German bunds hit an all-time low.  However, the European Central Bank said they believe “the economic recovery in euro area has been delayed not derailed.”  UK prime Minister May abruptly announced her resignation as she failed to reach an agreement to take the UK out of the European Union.  Emerging markets trailed developed markets in May and for the year to date.  International stocks fell 5.15% in May, but still have gained 7.37% so far in 2019.

Bonds surged in May as interest rates reached their lowest level since 2017.  Fears of a global recession driven by trade tensions sent investors to safe haven investments.  At the conclusion of the Fed’s May meeting they signaled that they don’t foresee making any changes to the Fed Funds rate for some time, continuing to take a wait and see approach.  Core inflation has been below their 2% target, spurring some investors to think a rate cut could be on the horizon, however, the Fed believes that the inflation soft patch is temporary.  The 10-year Treasury yield fell to finish the month at 2.14% down from 2.50% to start May. It was the largest one-month yield decline since 2015.  For the month, government bonds were the top performing sector and longer-term bonds topped shorter-term bonds.  The broad bond market jumped 1.78% in May and has gained 4.80% for the year to date.


Index Performance  MayYTDTrl. 1 Yr.
US Stock (Russell 3000)-6.47%10.92%2.50%
Foreign Stock (FTSE AW ex US)-5.15%7.37%-5.85%
Total US Bond Mkt. (BarCap Aggregate)1.78%4.80%6.40%
Short US Gov. Bonds (BarCap Gov 1-5 Yr)1.02%2.42%4.25%
Municipal Bonds (BarCap 1-10yr Muni)1.09%3.44%5.29%
Cash (ICE ML 3Month T-Bill)0.23%1.02%2.24%


April Market Commentary

US stocks continued their surge in April posting their best four month start to a year since 1987 and reaching new record highs.  The gains have been driven by a more accommodative Fed, corporate earnings topping expectations, solid economic news, and expectations of a trade agreement being reached between the US and China.  With half of S&P 500 companies reporting results, 76% have beat analysts’ forecasts, and profit is now expected to contract 1.6% from a year earlier, less than the 4% analysts had expected.  Economic news showed a more robust US economy with 196,000 jobs added in March, topping expectations, the unemployment rate remained at 3.8% and wage growth eased concerns about inflation.  Manufacturing, durable goods orders, retail sales and new home sales all outpaced expectations.  The first reading on first quarter Gross Domestic Product (GDP) showed the US economy grew at a better than expected rate of 3.2%.  In April, US stocks jumped 3.99% and have soared 18.60% since the start of the year.

Foreign stocks posted strong gains on an improved economic outlook and supportive central bank comments.  China posted strong economic numbers with manufacturing activity hitting a six-month high, a service sector reading reaching a 14-month high, and first quarter GDP growth topping expectations by holding steady at 6.4%.  In Europe, the eurozone posted a 1.5% GDP growth rate in the first quarter, picking up speed from the fourth quarter.  In addition, eurozone service sector activity hit its strongest growth rate since November and in Germany industrial output posted a solid gain.  Providing additional support for stocks, European Central Bank (ECB) President Draghi indicated the bank could take additional action if the economic picture for Europe worsened.  The EU gave the UK until October 31st to come up with a plan to leave the country bloc.  Emerging markets trailed developed markets in April and for the year to date.  International stocks rose 2.67% in April and have climbed 13.20% for the year to date.

Bonds were flat in April as interest rates rose from their lowest level of the year.  Solid economic news spurred investors to have a more optimistic view of the economy long term, driving the increase in interest rates.  Minutes from the Fed’s March meeting showed that the rate setting body had greater conviction that the best course of action was to stand pat on the Fed Funds rate for the time being.  The 10-year Treasury yield rose to finish the month at 2.51%, up from 2.41% to start April.  For the month, credit bonds were the top performing sector and shorter-term bonds topped longer-term bonds.  The broad bond market was flat in April, edging up 0.03%, but has gained 2.97% for the year to date.

Index Performance  AprilYTDTrl. 1 Yr.
US Stock (Russell 3000) 3.99%18.60%12.68%
Foreign Stock (FTSE AW ex US) 2.67% 13.20%  -3.01%
Total US Bond Mkt. (BarCap Aggregate) 0.03% 2.97%5.29%
Short US Gov. Bonds (BarCap Gov 1-5 Yr) 0.16% 1.38%3.70%
Municipal Bonds (BarCap 1-10yr Muni) 0.12% 2.33%5.04%
Cash (ICE ML 3Month T-Bill) 0.19%0.79%2.16%


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%