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Key Takeaways Second Quarter 2019
By Ralph Goldsticker, CFA | 15 July 2019
 

After a very strong first quarter and the Fed signaling potential rate cuts, capital markets continued to rise, albeit at a slower pace

  • Stock markets continued to rise around the globe. US stocks set record highs before falling back.

  • Bond prices climbed. Interest rates on Treasury bonds of all maturities fell 40 to 50 bps. Credit spreads narrowed as well.

  • Stock markets remained volatile due to uncertainty about monetary policy, trade conflicts, and geopolitical concerns.

 

Uncertainty about monetary and trade policies persist

  • Risks to the global economy persist and remain at an elevated level.

  • The Fed signaled an openness to cutting rates if the data indicate a slowing economy. Investors are expecting one or two rate cuts before the end of the year.

  • Brexit, populist sentiment, and trade conflicts continue to create uncertainty, but we remain optimistic that the issues will be resolved without significant disruption to the global economy and markets.

 

Growth is moderating, but the economic outlook is stable

  • The current economic expansion is the longest in US history.

  • The US economy is showing mixed signals. Growth is moderating. Labor conditions remain strong. Consumers are spending while businesses are not. 

  • Stocks appear to be fully priced. Future performance will depend on future earnings and economic growth meeting expectations, and on political uncertainty being contained.

  • Although rates are historically low, we don’t see a quick rebound on the horizon. Over the longer-term we expect low but positive returns from bonds; capital losses from rate increases will be offset by higher reinvestment rates.
     

Alan Biller and Associates is an investment adviser registered with the U.S. Securities and Exchange Commission

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