July 01, 2019
Cutler Investment Group Second Quarter 2019 Review
After a rocket shot upwards to start the year, markets experienced further gains during the second quarter; but they tested investor resolve in order to achieve them.
The double-digit gains in the first quarter left many investors wondering, “What’s next?” What was next was a bit of a rollercoaster as the second quarter started strong in April, then the wheels seemed to be coming off in May, before a strong rally in June based largely on the heels of commentary from Fed Chair Jerome Powell of an interest rate decrease. June is usually a terrible month for stocks (hence the cliché “sell in May and go away”), so this rally provided one of the best June return periods in modern market history and stocks finished the quarter right at all-time highs.
The primary drivers for both upside and downside continue to be speculation about the tariff/trade war situation and about possible actions by the Fed (and other Central banks to a lesser degree). The Fed continues to be keenly aware of market reaction to both their actions and their words, and has maintained the more patient dovish tone that Chairman Powell illustrated in Q1 following the Christmas Eve meltdown. The near-term reaction to this dovish tone is to be bullish, as this can make stocks look even more attractive, but as noted previously, this is built on a foundation of projected slowing global growth, which is hardly a bullish sign. The result was a quarter which experienced a unique phenomenon where both stocks and bonds were rallying at the same time.
We have noted some key data points in recent market commentaries. Those same data points seem to indicate that stocks are not necessarily overheated, but much of the recent gains are based on an interest rate move to the downside. Here is where those factors stand after the second quarter:
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