Best Quarter for U.S. Stocks Since 2009

Best Quarter for U.S. Stocks Since 2009

The breadth of the U.S. stock market gain in the first quarter of 2019 caused all sectors of the S&P 500 to end higher for the first time since 2014. The headline article in the April 2nd Wall Street Journal reports manufacturing activity in the U.S. and China (as the world’s two largest economies) grew in March to the extent that it muted financial-market fears of a global recession. Investors were expecting weaker manufacturing reports from both the U.S. and China, and with new confidence investors sold U.S. government bonds to buy stocks, which sent yields on longer-term U.S. Treasury bonds higher. This reversed the inverted yield curve where short-term yields were higher than long-term yields. An inverted yield curve lasting three months or more generally predicts an economic downturn.

Previously Owned Home Sales Soared in February
Mortgage rates were almost 5% in late 2018 and now they are approaching 4% providing a great boost to the housing market. When sales in housing heat up, it stimulates consumption in many other markets: carpeting, appliances, televisions, structural home improvements, paint, landscaping, furniture, window coverings, flooring, etc. Therefore, a hot housing market can be a positive influence on the broader economy. Another bright spot for the U.S. economy is that U.S. Treasuries have a positive yield, which is very hard to find in other countries. This status for U.S. Treasuries draws foreign capital to the U.S. and helps to keep interest rates low.

U.S. Economic Growth is Slowing
The Fed is forecasting slower U.S. economic growth for 2019 and 2020. In December the Fed thought the U.S. economy would grow by 2.3% in 2019 after hitting 3% growth in 2018. Now the Fed has lowered its their 2019 forecast down to 2.1% and even lower in 2020 with a forecast of 1.9%. To balance the pessimism, Fed Chair Powell asserts that the U.S. economic fundamentals are still very strong, wages continue to increase, unemployment is at historic lows and household confidence is high. I like to add that slow growth is still growth. The Fed has committed to pause interest rate increases for 2019 keeping interest rates low while we enjoy low

Scroll to Top