Market Insights - May 2019
Stock and bond markets continued to reward investors through April, as the US economy posted unexpectedly strong results.
Year-to-date, the S&P 500 has gained 18.13%, the S&P 400 Mid-Cap index 19.28% and the Russell 2000 index, a measure of small stocks, over 19%. Global stock markets have participated as well; the MSCI EAFE index of developed market securities rose 12.75% and emerging market stocks are up 12.6%.
Core PCE (the FED’s preferred measure of inflation) remains below the target of 2.0%, and ten-year U.S Treasury yields have dropped from 2.69% in December to 2.54% at the end of April, with lower intermediate term interest rates boosting fixed income returns. The Barclay’s Aggregate Bond Index is up 2.81% year to date, while high yield bonds and emerging market bonds are up 8.85% and 7.44% respectively.
The U.S. Dollar Index is currently trading around 98 and appears to be headed towards 100. This has impacted the returns on investment outside of the United States as most currencies are weakening, pushing returns in dollar terms below those in local currencies. It is especially evident in European Monetary Union countries which have been impacted by a 3% loss in currency. However, the UK stands out as one of the few markets where the currency has appreciated, adding to their dollar denominated performance.
The initial numbers for first quarter 2019 GDP growth showed a gain of 3.2%, much greater than expectations, and the best start to a year since 2015. Now, consensus estimates for U.S. GDP growth in 2019 are in the range of 2.7%, with a 2.3 % growth rate expected for next year. Growth estimates for the Eurozone remain at 1% for 2019, and 1.4% in 2020.
Eugene Balerna, Jr. CIMA ®
Director, Investment Research
Steven I. Weber
Registered Investment Advisor