Category: Monthly Commentary

Monthly Commentary

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%

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%