By Kieran Osborne, MBus, CFA®
Chief Investment Officer
We’ve prepared an economic update and outlook for the second quarter of 2019 that focuses on a few key themes – an update on the market rebound experienced year-to-date, an overview on the health of the U.S. and global economy, and an update on Fed policy and the current interest rate environment and implications moving forward.
After experiencing a challenging 2018 and Q4 in particular, stocks rebounded strongly in Q1 2019, with the S&P 500 experiencing its best start to a year since 1998. While many retail investors missed out on this equity upswing, Mission Wealth participated fully. The Fed’s more dovish tone and positive signs regarding a trade agreement with China helped investor sentiment. Despite the bounce, stocks are currently trading in-line with historic valuation multiples, with the most attractive levels found in International and Emerging Markets.
We anticipate the current economic expansion will enter its 11th year and become the longest ever this summer, and we do not currently see a near-term catalyst that could disrupt it. We anticipate growth rates to moderate for the balance of the expansion but may get an additional stimulus from pent-up capital expenditure, should we reach some form of trade agreement with China. Despite recent cooling, the global economy and trade appears to be picking up, with Chinese data particularly improving.
The Fed appears to have adopted a “wait and see” approach to monetary policy and may find it difficult to adjust rates near-term. Part of the yield curve inverted in March, though we do not think it forebodes an imminent recession. Moving forward, we believe we will be in a “lower for longer” interest rate environment and are actively managing our fixed income allocations accordingly.
For more details on these key themes and outlook, watch my Market Perspectives video presentation above.