News & Insights

The market decline of the fourth quarter of 2018 seemed to foreshadow a turbulent year ahead. But through the end of the most recent quarter, the market has once again proven to be resilient. The U.S. stock market, measured by a variety of indices, posted its largest single quarter gain since the third quarter of 2009. This reminds us that extrapolating market returns from one month to the next, or expecting that trends will lead to more of the same is a fool’s game.

Just about every asset class rebounded sharply in the early months of 2019. The Russell 3000 index, a broad measure of U.S. stocks, is up 14.04% while the more widely known S&P 500 closed the quarter up 13.65%. International investors also participated in the rebound albeit to a lesser extent. The broad-based MSCI EAFE index of companies in developed foreign economies gained 9.04% in the first quarter. Emerging market stocks of less developed countries, as represented by the EAFE EM index, gained 9.56% in US Dollar terms in the first quarter.

U.S. fixed income markets also snapped back during the quarter after what was a difficult 2018. High quality, investment grade bonds rallied 5.14% which trailed only High Yield, up 7.40%, as the strongest performer within the fixed income asset class.

So what is driving the recent reversal in market performance? As has been the case for a significant portion of the 10 year bull market, it starts with the Federal Reserve. After increasing interest rates four times in 2018 and forecasting two more in 2019, the Fed reversed course and announced they will remain patient. This data dependent, wait and see approach, invigorated equity investors and removed doubt that the Fed would end the party early by tightening too much too fast.

Furthermore, some of the market “noise” discussed in previous commentaries began to subside. US-China relations have thawed and though no formal accord has been reached, it is evident that both sides understand that a resolution will benefit both nations. Those expecting fallout from the Robert Mueller investigation were met with disappointment. Though further partisan rancor in Washington, DC, is expected, the focus will move towards other issues, none which will have lasting impact on the economy or markets at least until the 2020 elections.

We continue to focus on the underlying economic data, which remains positive. Though certain indicators and corporate earnings growth are decelerating, it is important to note that slower growth does not equal recession. With strong employment, low inflation, and an accommodating Fed, we see a recession occurring in 2019 as a low probability.

The Information contained in this document is based on data received from third parties which we believe to be reliable and accurate. YorkBridge Wealth Partners, LLC has not independently verified the information and does not otherwise give any warranty as to the truth, accuracy, or completeness of such third party data, and it should not be relied upon as such. Any opinions expressed herein are our current opinions only. YorkBridge Wealth Partners, LLC is an SEC Registered Investment Adviser under the Investment Advisers Act of 1904 (“Advisers Act”). Registration of an investment advisor does not imply any specific level of skill or training. The information contained in this document is to assist with general planning. Please consult with your own tax advisor and attorney for more specific information.