Wow. After an abysmal 4th quarter of 2018, the market sprang to life and rebounded solidly in the first three months of 2019, nearly making up for the losses which ended last year. Just three months ago, one week prior to the December 24th low point, we posted a commentary reminding you to think of the long term. As if on cue, we then had a quarter which saw the Dow Jones Industrial Average and the S&P 500 both rise over 10% each, something we would only expect to see in a really good 12-month period.
So, why did we have such a positive turnaround? Progress on international trade talks has certainly helped as investors now have more reason to look for a normalizing of policy after a period during which the threat of tariffs made people feel pessimistic about the direction of the global economy. The actions of the Federal Reserve in regards to interest rates have been powerful as they switched gears and held off on further rate increases due to concerns about slowing growth in the U.S. economy. This slower growth ought to be a negative, but it has been forecast for some time as the bump from the tax act receded. What wasn’t as predictable were the Fed’s actions, and this apparent switch from rising interest rates to a stable rate environment has given investors cause to be cheerful.
Last month marked 10 years since the end of the Great Recession and the ensuing expansion. Although we wish we could tell you when the next recession will arrive and just what sort of recession it will be, that’s not something we or anyone else knows, so don’t fall victim to the plethora of click-bait telling you that the end of the world is coming. Meanwhile, we’ll keep an eye on the indicators and continue to analyze value in the marketplace to help make good decisions in our overall discipline. Thanks for letting us continue to do this for you.