News & Insights
YorkBridge Second Quarter Commentary
As the second quarter comes to a close, U.S. equity markets are at or near their all-time highs. The S&P 500 stands at 2,975 which is up 17.35% on the year while the broader Russell 3000 index is up 17.58% over the same time frame. This performance, while strong, reflects a continued reversal of sorts from the negative sentiment exhibited during the fourth quarter of 2018 and is not, in our opinion, indicative of strong economic fundamentals.
Trade policy dominated the discussion in financial and political media circles during the 2nd quarter. The strong market performance in April quickly reversed in May as the escalating threat of an all-out trade war between the United States and China replaced optimism that a deal between the two economic powers could be worked out. Concerns were then ratcheted up on May 31st when the President surprised investors with a threat of tariffs against Mexico as a way to enforce their immigration policy. This threat that was withdrawn just a week later. In spite of the increased geo-political risks and a softening of the global economy, markets rallied in June leaving investors to ask themselves, what is going on?
Once again it is the Fed’s policy decisions that has caught everyone’s attention, rather than the bluster from the White House. After raising interest rates four times in 2018, recent statements from the Fed in June have opened the door to potential rate cuts in response to a slowing U.S. economy. Equity markets pushed higher on these dovish comments and the S&P 500 returned ~6.89% in June. While markets are already pricing in rate cuts, it is not a foregone conclusion. If it does occur, it would be the first time that the Federal Reserve has cut rates since 2009 but the fourth time that the Fed has stepped in to help facilitate economic growth (2011, 2013, and 2015). The additional monetary stimulus should continue to support risk assets (i.e. equities) in the near term.
It is evident that global economic growth has slowed down and that the risk of a recession has increased. Should we in fact see lower interest rates, it could spur borrowing and business investment to help balance out the negative effects of a slowdown and an ongoing trade war with China. While it may be tempting to add to stocks when the market is reaching new highs, it is our view that clients stick to their long term strategic allocation and not make investment decisions based on current news headlines.
As always, please do not hesitate to contact us if you have any questions or should your investment objectives change.
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.