TrustWell’s Quarterly Market Review: Q2 2019

By Brett Freese

Market Highlights

• US Stocks had a positive quarter with Large Cap leading the way.
• US Bonds had a strong quarter in light of decreasing interest rates.
• Precious Metals shine with a strong quarterly return.

Economic Notes:

• Increasing difficulty in the United Kingdom Brexit process and negotiations.
• Federal Reserve’s incredible reversal on interest rate policy from December 2018 of more interest rate increases to come to today’s wait and see approach with a leaning towards lowering interest rates.
• US and China continue to escalate trade tariffs, but as I write this note there is renewed hope for a trade agreement here at the end of the 2nd quarter.
• US Treasury yield curve continues to invert (Meaning long-term interest rates are moving below short-term interest rates).

Historical Stock Market Declines:
Market declines and inclines rarely look the same or even feel the same, but they do happen and the ups and downs are a part of the process – It is important to have a plan/strategy so emotions don’t dictate buying or selling.

A 5% or greater loss occurs about 3 times a year
A 10% or greater loss occurs about once a year
A 15% or greater loss occurs about once every 2 years
A 20% or greater loss occurs about once every 3.5 years

Please know that when stock prices go down the “market collapse gurus” receive the most air time. Likewise, when stock prices go up all the “bull market gurus” talk about how the market will continue to be up BIG. Please know that most “gurus” are great with hindsight to justify how important it is to have their voice heard.

Market Scorecard for the 2nd Quarter of 2019:

US Equities:

+4.3%                S&P 500 (Index of the largest US publicly traded companies)

+2.10%              Russell 2000 (Index of 2000 Small-cap US publicly traded companies)

Global Equities:

+1.62%                MSCI EAFE (Index of Large and Mid-cap across 21 developed markets non-US)

-0.71%                 MSCI EM (Index of Large and Mid-cap across 24 emerging markets non-US)

US Bonds:

+3.08%                Barclays US Aggregate Bond Index (Broad Bond Market Index)

+5.92%                USTREAS T-Bill Constant Maturity Index (US Short-term Bills Index)

+2.14%                 Barclays Municipal Bond Index

Other:

+2.91%                Morningstar World Bond Category Index

+6.56%                Commodities – Precious Metals

Market Indicators:

Inflation:
1.79% as of 06/19/19  (Up 0.27% from 1.52% as of 03/15/19)

Unemployment: 
3.6% as of 06/07/19  (Down 0.2% from 3.8 in March)

Fed Funds Target Rate:
2.25%-2.5% as of 06/25/19  (No change from last quarter)

Suggested Next Steps:

• Make sure you know how your investment allocation and diversification are important factors in both risk management and returns.
• Understand that market cycles are normal. The markets go up and down in mostly unpredictable directions and amounts. The ups and downs of investments many times seem to make sense only after they happen, however, market prediction is very difficult. (i.e. the next stock market crash has been predicted every year since 2008).
• Your investments are just one factor in the success of your life, money, and purpose. Make sure that you are confident in your full financial plan, so you can successfully have an amazing ROL (Return on Life).
• If you have questions about your investment plan, please schedule a phone or in-person meeting with your TrustWell Financial Advisor.