Monthly Market Insights | May 2019

 
 
 

US Markets

Stocks extended their rally this year on the heels of reinvigorated economic strength and better-than-expected corporate earnings, setting record highs in April.

The Dow Jones Industrial Average gained 2.56 percent, while the Standard & Poor’s 500 Index picked up 3.93 percent. The NASDAQ Composite led, bounding 4.90 percent higher. ¹

 
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Entering the month, investors were worried after the release of a poor February jobs report and other disappointing economic data. But sentiment quickly reversed, following a wave of upbeat news.

Investor Enthusiasm

The early-month rally was supported by comments that a trade deal may be imminent. Stocks inched higher, as earnings season began on a mixed note. But as more companies reported, investor enthusiasm increased as more firms checked in with better-than-expected numbers and raised 2019 guidance.

Strong earnings reports suggest to some investors that the consensus view of first-quarter economic growth may have been overly pessimistic.

Earnings, Earnings, Earnings

Through April 26th, 46 percent of companies in the S&P 500 index had reported earnings for the January-through-March quarter. Of those, 77 percent posted earnings above estimates; though, there was a sprinkling of big disappointments, according to FactSet Research.²

April Highs

Investors powered the S&P 500 and NASDAQ Composite indices to new all-time highs, just as the market was entering the busiest stretch of the earnings season. As more companies reported, S&P 500 and NASDAQ Composite both set yet another record close on the final trading day of the last full week in April.

Overall, stocks were mixed at the month’s closing: the S&P 500 ended at a record high, while the NASDAQ pulled back from its historical top.

Sector Scorecard

Most industry sectors ended the month in the positive column, led by gains in Communication Services (+9.51 percent), Financials (+8.83 percent), and Technology (+6.19 percent). Gainers also included Consumer Discretionary (+5.62 percent), Consumer Staples (+1.68 percent), Energy (+0.06 percent), Industrials (+3.56 percent), and Materials (+2.63 percent). Losses were felt in Health Care (-3.16 percent), Real Estate (-1.66 percent), and Utilities (-0.70 percent). ³

 
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What Investors May Be Talking About in June

In part, the stock market’s advance this year has been powered by the Fed’s wait-and-see policy on interest rates and an improving outlook for a China-U.S. trade deal. But as one set of worries appears to fade, new ones tend to emerge.

Investors may be paying close attention to upcoming reports, including second-quarter Gross Domestic Product. They also are expected to keep a close eye on inflation reports and whether March’s increase in the Consumer Price Index is an aberration or the beginning of a sustained period of higher prices.

Goldilocks Economy

For now, it appears that markets may be happy with a “just right” Goldilocks economy: cool enough not to spark rising prices or prompt the Fed to take action, but warm enough to avoid chilled company profits or fiscal sluggishness.

In the weeks ahead, reports may be judged by one simple standard: is the news “just right?”

 
 
 

World Markets

The MSCI-EAFE Index gained 2.2 percent on hopes that the continuing economic recovery in China would spark higher economic growth in otherwise struggling economies in the eurozone.⁴

Despite weak economic numbers and no resolution on Brexit, developed markets in Europe managed gains on good economic data out of China (which represents an important importer of European goods) and a positive start to their earnings season, with France gaining 4.4 percent, Germany increasing 5.7 percent, and the United Kingdom moving up 1.4 percent.⁵

Stock gains in the Pacific Rim markets were solid, with Australia advancing 3.2 percent, and Japan, 5.0 percent.⁶

 
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Indicators

Gross Domestic Product

Economic growth in the first quarter surprised investors and economists, alike. The Bureau of Economic Analysis announced that the economy grew at a 3.2 percent annualized pace in the first quarter, despite the headwinds of a government shutdown in January and an inclement February.⁷

Employment

Job growth staged a strong rebound from February’s weak number, as nonfarm payrolls increased by 196,000 in March. The rate of wage gains slowed a bit, rising 3.2 percent year-over-year. The unemployment rate was unchanged at 3.8 percent.⁸

Retail Sales

Retail sales declined 0.2 percent in February, while January retail sales were revised higher, from 0.2 percent to 0.7 percent.⁹

Consumer spending rebounded strongly in March, rising 1.6 percent – the largest monthly jump since September 2017.¹⁰

Industrial Production

Output of domestic factories, mines and utilities fell 0.1 percent in March, weighed down by a slowing global economy.¹¹

Housing

Housing starts slipped 0.3 percent in March.¹² Existing homes sales slid 4.9 percent, with declines occurring in all geographic regions.¹³ New home sales rose 4.5 percent, an upside surprise given the consensus view that expected a 2.5 percent decline.¹⁴

Consumer Price Index

Driven higher by a spike in energy costs, the Consumer Price Index rose by 0.4 percent in March. For the 12 months ended March, consumer prices increased 1.9 percent.¹⁵

Durable Goods Orders

The initial estimate of orders for long-lasting goods declined 1.6 percent in February, weighed down by a sharp drop in aircraft orders.¹⁶

March orders of durable goods jumped by 2.7 percent. For the first quarter, durable goods orders are 3.0 percent higher versus the same time period last year.¹⁷

 
 
 

The Fed

Minutes from the Federal Open Market Committee meeting in March provided further evidence that Fed officials remain comfortable with its pause in rate hikes.

Fed officials noted in the minutes that there appears little reason to raise rates amid an environment of stable, within-target inflation and recent signs of global economic weakening.¹⁸

 
 
 

By the Numbers

Books and Reading

 
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The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. Investing involves risks, and investment decisions should be based on your own goals, time horizon and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Any companies mentioned are for illustrative purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, time frame and risk tolerance. The forecasts or forward-looking statements are based on assumptions, may not materialize and are subject to revision without notice. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. Please consult your financial advisor for additional information. Copyright 2019 FMG Suite. 1. The Wall Street Journal, April 30, 2019 2. FactSet Research Systems, Inc., April 26, 2019 3. FactSet Research Systems, Inc., April 30, 2019 4. MSCI.com, April 30, 2019 5. MSCI.com, April 30, 2019 6. MSCI.com, April 30, 2019 7. The Wall Street Journal, April 26, 2019 8. CNBC.com, April 5, 2019 9. The Wall Street Journal, April 1, 2019 10. The Wall Street Journal, April 18, 2019 11. The Wall Street Journal, April 16, 2019 12. Bloomberg.com, April 19, 2019 13. The Wall Street Journal, April 22, 2019 14. The Wall Street Journal, April 23, 2019 15. CNBC.com, April 10, 2019 16. The Wall Street Journal, April 2, 2019 17. The Wall Street Journal, April 25, 2019 18. The Wall Street Journal, April 10, 2019 19. PewResearch.org, 2018 20. PublishersWeekly.com, 2018 21. Forbes.com, April 29, 2018 22. Statistica.com, 2018 23. Bowker.com, 2019 24. BusinessInsider.com, 2019 25. The Washington Post, June 29, 2019 26. TheDiplomat.com, 2019 27. HorizonTimes.com, 2019 28. Bloomberg.com, November 2, 2018 29. People.com, January 30, 2019 30. Biography.com, 2015