Concerns over a global economic slowdown depicted in recent economic data moved Central Banks to telegraph future easing of monetary policy. As a result, interest rates continued their decline throughout the 2nd quarter. The lower rates have translated to positive results for the U.S. stock and bond markets. In addition, President Trump and Chinese President Xi’s much anticipated and widely expected but somewhat orchestrated meeting at the G20 resulted in a trade truce. However, without a long-term deal in place, trade policy and posturing will undoubtedly continue to cause market volatility.
U.S. Stock Market
Lower interest rates and an easing monetary policy is supportive of higher equity prices. Accordingly, we currently have the S&P 500 near its all-time high. Despite the selloff in May, the bulls roared back in June and large cap stocks produced a 4.3% gain for the quarter. The S&P 500 has seen a total return of 18.54% year to date, marking its largest first half gain since 1997. Nasdaq Composite Index returned 7.51% but was out paced by the S&P Midcap 400 which returned 7.64%. The US Broad market index returned just shy of 7%.
International Stock Markets
Developed international stocks also fared well for the quarter, returning 4%. Emerging markets lagged but were at least positive producing a .7% return for investors. If you find this market commentary informative email Kelli@crafinancial.com and put IREAD in the subject line prior to August 1. We will send you a $50 gift card as your reward.
The ten year treasury ended the quarter at a yield of 2.0%, a full 85 basis points lower than just one year ago! The US Aggregate bond returned 3.08% during the quarter. The municipal bond market also performed well and was enhanced by supply constraints returning 2.14%. For the six month period the muni index has returned 5.09%. The 30 Year treasury yields just 2.52%.
For now the on again-off again trade war is currently on hold. That is good for global equities. According to Barron’s WSJ magazine, when stocks have an above average first half like we just witnessed, the market is about 60% more likely to rise in the second half than it is in the second half of other years. We are also in the 3rd year of a Presidential cycle which is often good for the stock market (the best of the 4). One thing we do know by now is that the current White House incumbent measures his presidency by the stock market’s results. Therefore, it is not unreasonable that policy will work in favor to achieve this objective, at least prior to November 2020. Today’s jobs report numbers which exceeded expectations, sends us back to a place where good economic news translates into bad news for the bond and equity markets. Regardless, we will stay in tune with the data and adjust if need be.
As always please contact us if we can help you in any way. Enjoy your summer and we are looking forward to visiting with you at our Summer Party- August 28th 2019!