Broker Check

And They’re Off…

July 25, 2019
Share |

And They’re Off…

by Justin Sautter

Domestic stock markets hit the ground running in January and maintained a robust pace
through the end of March and into early April. Gains were propelled by the Federal Reserve
indicating that rate hikes were no longer on the table in 2019, continued optimism on a
US/China trade deal, and accommodating moves by foreign central banks.

As the second quarter gets underway, we are watching oil prices carefully. Having sold off
nearly 30% in the fourth quarter of 2018, oil rallied back 32% in the first quarter of 2019. This
potentially signals pain at the pump for consumers but might be offset by rising hourly wages.

Additionally, we have our eye (and we are not alone) on the yield curve. No doubt you have
heard a lot about the “inverted yield curve”. This happens when short term rates are higher
than long term rates. Currently we are seeing higher rates on short term borrowing than
medium term borrowing (indicative of a belief that interest rates will fall from current levels).
History has shown that inversions frequently presage a recession. But, a recession can often
take up to two years to materialize (if it materializes). As you listen to pundits talk about yield
curves, know that since the early 1960s there have been two occasions where the yield curve
inverted and there was no ensuing recession.

With April here, we are eagerly awaiting the beginning of “Earnings Season”. This gets
underway in earnest the week of the 22 nd and we will be carefully monitoring company reports.
Solid results and good prospects for growth will help support current valuations and could push
markets higher.

Please don’t hesitate to call anytime to discuss your investments or other aspects of your

Best Regards,

Justin Sautter

2019 Year-to-Date March 31 Returns for Key Asset Classes and a Diversified Portfolio:

Fixed Income 2.9%
Cash 0.6%
Global High Yield Bonds 6.3%
REITS 17.2%
International Equity  10.1%
US Large Cap 13.6%
US Small Cap 14.6%
Emerging Equity 10.0%
Commodity 6.3%
Diversified Portfolio9.1%

(Diversified Defined as 60% Equity, 35% Bond, 5% Commodity) Source: JPMGTM 2Q2019