On the heels of the Federal Reserve altered its outlook on interest rates in March, the stock and bond markets took notice with the S&P 500 advancing 1.79% near its all-time high set last year. While both the Federal Reserve and the European Central Bank communicated that they saw economic growth moderating, the market remains optimistic that trade talks between the U.S. and China will eventually resolve in a positive manner. (1)
Without a doubt, the major story of the month was the Federal Reserve’s newly “dovish” stance on monetary policy. In late 2018, the central bank had forecast two interest rate hikes for the coming year. However, on March 20th, it was announced that rates would be held steady and they project only one quarter-point hike through 2021. With this dramatic pivot, the Fed also lowered its estimate of the 2019 U.S. economic expansion to 2.1%, down from the prior 2.3%. Inflation has also remained muted, with the latest Consumer Price Index (February) displaying only a 1.5% annualized gain; further reason why the Fed did not see any reason to continue raising interest rates.
Talking to the media after the release of the March 20 policy statement, Fed Chairman Jerome Powell remarked that the “growth of economic activity has slowed,” adding that Fed policymakers saw “some weakening” in the economy, but no signs of a recession. (4)
Currently, Wall Street’s collective eye is focused not only on the upcoming earnings season, but also on domestic and global growth. Ceasing interest rate increases by the Fed combined with declining bond yields are signaling economic growth might be slowing. Earnings reports will be closely scrutinized as to whether or not there are any indications of slowing domestic and global growth. While we are nearing all-time highs in the S&P 500, only a few months removed for the sudden drop in December, it bears in mind a famous quote by Warren Buffet: "Be fearful when others are greedy and greedy when others are fearful."
Markets go through cycles, and over the long term, you will experience many of them as an investor. There will always be ups and downs; your investment approach takes them into account, plus your time horizon. Whether April turns out to be spectacular, disappointing, or somewhere in between, your long-run objectives should remain your focus.
Monthly Financial Tip:
In view of possible extended care needs, you may want to look at a hybrid life insurance policy that can potentially give you a pool of money to pay those costs. Unused benefits may be paid to the policy’s beneficiaries after your death.
1 - barchart.com/stocks/indices?viewName=performance [3/29/19]
2 - cbsnews.com/news/fed-rate-hikes-none-in-2019-federal-reserve-projects-no-rate-hikes-slower-growth-this-year/ [3/20/19]
This post has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Bob Lawson is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.