TrustWell’s Quarterly Market Review: Q1 2019

By Brett Freese

Highlights

Federal Reserve: 

In our Q4 2018 Quarterly Market review I wrote: “No major inflationary pressures as of yet and I am a bit curious as to what data they (the Federal Reserve) are seeing to continue raising interest rates.  In my opinion, a more cautious ‘wait and see’ plan by the Fed in light of current market and economic conditions would be prudent.”  Wow! What a difference a few days make and a few comments by Chairman Powell.  They did not ask me for my opinion, but it looks like they may have read my recommendation (I humbly doubt that).  This was a major reason you see the positive returns in the below market statistics.  It is now quite possible that the Fed will not raise interest rates at all this year.

Bonds vs Stocks: Which one is correct? 

I read many opinions and articles on investing and it is interesting to see how much is written on a supposed “disconnect” between the bond market and the stock market.  Many would argue that the bond market’s action this past three months is pointing to a recession and others would argue that the stock market’s action is pointing to continued economic strength. We don’t know for certain, but it seems clear to me that investors around the world were choosing to increase their investment in US and/or Dollar based investments, therefore benefiting US bonds, US stocks, and the US Dollar.

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 and voices get the most air time just like when stock prices go up all the bull gurus talk about how the market will be up BIG.  Know that most “gurus” are great with hindsight to justify how important it is to have their voice heard.

Market Scorecard for the 1st Quarter of 2019:

US Equities:

+13.65%                S&P 500 (Index of the largest US publicly traded companies)

+14.58%               Russell 2000 (Index of 2000 Small-cap US publicly traded companies)

Global Equities:

+9.65%                MSCI EAFE (Index of Large and Mid-cap across 21 developed markets non-US)

+9.47%                 MSCI EM (Index of Large and Mid-cap across 24 emerging markets non-US)

US Bonds:

+2.94%                 Barclays US Aggregate Bond Index (Broad Bond Market Index)

+3.11%                 USTREAS T-Bill Constant Maturity Index (US Short-term Bills Index)

+2.90%                 Barclays Municipal Bond Index

Other:

+2.42%                Morningstar World Bond Category Index

+10.29%                 Commodities – Precious Metals

Market Indicators:

Inflation:
1.52% as of 03/15/19

Unemployment: 
3.8% as of 03/08/19

Fed Funds Target Rate:
2.25%-2.5% as of 03/28/19

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.