-1st Quarter, 2019-
International news continued to dominate the headlines. The U.S. announced that it would postpone the March 1st deadline for tariffs on $200 billion of Chinese goods. Additionally, President Trump announced “substantial progress” on issues ranging from intellectual property protection to currency manipulation.
An agreement between the U.S. and China became even more important, as it was announced that the U.S. trade deficit with China reached -$621 billion in 2018.
President Trump met with North Korean leader, Kim Jong-Un, for a second time to discuss North Korean denuclearization. The meetings were cut short, after North Korea failed to agree to complete denuclearization.
The U.S. stock market built on the positive momentum that began in January, with the S&P 500 gaining another 3% in February.
Statements from the Federal Reserve helped further increase positive investor sentiment. Early in January, Fed Chairman Jerome Powell stressed that The Fed would not hesitate to respond with “all the tools at its disposal” to counteract an economic downturn. Additionally, Chairman Powell testified before Congress in February, assuring the members that The Fed will remain patient in its unwinding of the Balance Sheet. The Fed Funds rate remains at 2.4%, roughly half the historical average rate.
While corporate earnings growth has slowed, Full-Year 2019 estimates still have earnings growth finishing at 5.3%, over 3% higher than the current inflation rate.
One sector where innovation and growth potential are often overlooked is the energy sector. In the past few years, the U.S. has gone from being very dependent on foreign energy to being the world’s largest producer of oil and natural gas. New technologies in horizontal drilling and fracking have created an energy revolution, and many American energy companies are well-positioned to reap the benefits.
As global investor uncertainty rises (Figure 1), there is a good chance volatility is here to stay. While markets tend to shift between fear and greed, current markets seem to be trapped in a state of confusion. This can lead to emotionally-driven buying and selling behavior. Those who stay the course and maintain their investment strategy have a chance to benefit in times of market uncertainty.
** This report is meant to inform the reader of our current market opinion, which we, as professional money managers, use in our decision-making. It should be noted that stock market and bond market data are subject to varying interpretations and any one interpretation will not necessarily guarantee investment success. The information obtained from the sources specified herein and used as basis for our current market opinion is believed reliable, but we do not guarantee the accuracy of such information and it is not considered all-inclusive. Opinions are current opinions only and are subject to change without notice. Prices, quotes, rates and yields are subject to change without notice. Investments are NOT FDIC INSURED, NOT BANK GUARANTEED, AND MAY LOSE VALUE.
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