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Monthly Market Insight - March 2019

Monthly Market Insight - March 2019

March 13, 2019

US Markets

Stocks rallied on growing optimism that a trade agreement between the U.S. and China may be imminent as well as news that the Fed has paused any further interest rate hikes.

The Dow Jones Industrial Average led for the month, gaining 3.67 percent. The Standard & Poor’s 500 rose 2.97 percent, while the NASDAQ Composite added 3.44 percent.1

After January's already-exceptional performance, stocks began February modestly higher. These same gains muted worries that China and the U.S. would not reach a trade agreement by March 1st.

Mixed Signals

A weak December retail sales number sent a surge of anxiety through investors, feeding concerns that slowing economic data may be pointing to a slowdown. But investors quickly shrugged off the news and focused on an improved outlook for trade negotiations, a rally in oil prices, and the diminished likelihood of another federal government shutdown.

Stocks extended their gains as the month wore on. The markets welcomed news released by the Federal Open Market Committee (FOMC), which confirmed that the Fed governors had adopted a “wait-and-see” approach on future interest rate hikes. 

Sector Scorecard

For the second consecutive time, all industry sectors finished the month in positive territory, with gains in Communication Services (+2.89 percent), Consumer Discretionary (+3.53 percent), Consumer Staples (+4.54 percent), Energy (+4.74 percent), Financials (+2.27 percent), Health Care (+3.37 percent), Industrials (+9.32 percent), Materials (+4.91 percent), Real Estate (+4.47 percent), Technology (+7.78 percent), and Utilities (+6.30 percent).2

What Investors May Be Talking About in April

The current economic expansion reached the age of 104 months in February, making it the third-longest expansion in U.S. history. By May 2019, it will become the second-longest stretch of economic growth on record.3

To gain a better understanding of what may lie ahead for economic growth and corporate earnings, investors may want to keep an eye on overseas markets.

Growth Rates

In the three largest economic zones outside of the U.S. -- the European Union (EU), Japan, and China -- economic growth rates are trending lower. In the EU, for example, the European Commission recently reduced its Gross Domestic Product growth rate estimate for 2019 to 1.5 percent, from 1.9 percent in 2019.4, 5

Economic conditions abroad can impact on U.S. firms, since 29 percent of all revenues generated by S&P 500 companies are attributable to overseas markets. 6

World Markets

Progress in trade negotiations between the U.S. and China boosted international stocks, leading to a gain of 2.62 percent in the MSCI-EAFE Index for February.7

European stocks posted generally solid gains with France leading, up 5%. The Netherlands, Switzerland, and the U.K. enjoyed strong gains. Germany rose 3.1%, despite economic concerns and continuing potential tariffs on its auto exports to the U.S8

Among Pacific Rim markets, Hong Kong, Australia, and Japan notched healthy gains.9

Indicators

Gross Domestic Product

Exceeding expectations, the economy grew at an annual rate of 2.6 percent in the fourth quarter. However, this 2.6 percent increase was a deceleration from prior quarters in 2018. Economic activity was held back by a slowdown in consumer spending, even as business investment and exports grew.10

Employment

Nonfarm payrolls increased by 304,000 in January, marking the 100th straight month of job increases. This marks the sixth consecutive month that wage growth had exceeded 3 percent. The unemployment rate ticked higher to 4 percent, from 3.9 percent in January.11

Retail Sales

Retail sales declined 1.2 percent in December, the sharpest drop since 2009.12

Industrial Production

Pulled down by a drop in vehicle production, industrial production fell 0.6 percent from the prior month.13 

Housing

Housing starts fell by 11.2 percent in December, touching levels not seen in more than two years. 14 Sales of existing homes slid 1.2 percent in January, falling for the third consecutive month. Relative to January 2018, sales were lower by 8.5 percent.15 New home sales reports were delayed into March due to the backlog caused by the federal government shutdown.

Consumer Price Index

Prices for consumer goods were unchanged in January, held down by a decline in energy costs. Year-over-year, inflation was 1.6 percent.16

Durable Goods Orders

Durable goods orders increased 1.2 percent in December, closing out the year with an 8.1 percent jump from 2017 levels.17

The Fed

The Fed decided at January’s FOMC meeting that it would stop the unwinding of its balance sheet later in the year.

Meeting minutes also confirmed that officials would place a pause on its earlier interest rate hike plans; though the committee was split on whether another rate hike would be implemented in 2019.18

  1. The Wall Street Journal, February 28, 2019
  2. FactSet Research Systems, Inc., February 28, 2019
  3. MarketWatch.com, February 26, 2019
  4. European Commission, February 7, 2019
  5. Bloomberg.com, February 5, 2019
  6. S&P Global, March 19, 2018
  7. MSCI.com, February 28, 2019
  8. MSCI.com, February 28, 2019
  9. MSCI.com, February 28, 2019
  10. The Wall Street Journal, February 28, 2019
  11. The Wall Street Journal, February 1, 2019
  12. The Wall Street Journal, February 14, 2019
  13. The Wall Street Journal, February 15, 2019
  14. The Wall Street Journal, February 26, 2019
  15. The Wall Street Journal, February 21, 2019
  16. The Wall Street Journal, February 13, 2019
  17. The Wall Street Journal, February 21, 2019
  18. The Wall Street Journal, February 20, 2019
  19. Statista, 2018
  20. WorldBank.org, 2019
  21. InsureOn.com, 2019
  22. IBM, 2018
  23. CSOOnline.com, January 4, 2018

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.

Investing involves risks, and investment decisions should be based on your own goals, time horizon and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.

Any companies mentioned are for illustrative purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, time frame and risk tolerance.

The forecasts or forward-looking statements are based on assumptions, may not materialize and are subject to revision without notice.

The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.

International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. 

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