1Q2019  |  All Ages

Markets Overview

After a high-flying January, stocks continued to rally throughout the month of February, with the Dow, S&P 500, and NASDAQ gaining another +4.03%, 3.21% and 3.44%, respectively; delivering the best January and February returns since 1987. This brought each of the aforementioned indexes into double-digit return territory for the year. International markets weren’t quite as strong but the MSCI EAFE still added +2.56% and the MSCI Emerging Markets index mustered a +.23% increase, landing each just above the +9% threshold year-to-date. Bonds were essentially flat, with the Barclays US Aggregate dipping -.06% for the month, landing at +1.0% for the year.

Last month we wrote about our cautious optimism moving forward, as a more accommodative Federal Reserve, hope for trade resolution, and reasonable valuation levels gave us reason to believe that more gains could be on the horizon. While we haven’t seen a material change in the economic picture in the last 30 days, data does appear to be softening, and this last leg up has given us a bit more reason for pause in the short-term. Earnings in February were generally strong on a backward-looking basis, but more modest looking forward, and though Indexes are not quite back to their 2018 highs, they have been plowing forward at a pace that is not likely sustainable for the rest of the year. On January 1, very few analysts would have predicted a year of double-digit gains for markets in 2019, and now that we sit at those levels, it’s possible that we will shift back into a more volatile cycle of trying to hold onto what we have made for the next few months.

As mentioned above, the primary drivers for markets remain relatively the same, but we are lacking a major catalyst for movement. Until we get more details on trade resolution and another round of quarterly earnings, we expect the risk markets to trend mostly sideways or even down. We need to see if companies are able to execute a “soft landing” into normal growth rates moving forward or if we will in fact see negative growth in some sectors without the support of a tax reform. Until then, we will likely see company-specific news drive broader markets as investors search for clues around the next trend that we will encounter. Additionally, we continue to examine the conflicting messaging delivered by equities and bonds. Many technical equity indicators have turned bullish, while the yields on bonds have remained relatively flat during this strong double-digit equity rally to start the year. This tells us that investors’ short-term economic and market outlook is more modest than equities would leave us to believe, or even bearish.

With all of this in mind, we feel that we are well positioned in our portfolios moving forward, as we have maintained a balanced exposure to both growth and value equities, and a focus on higher credit quality and shorter duration in our fixed income allocations. Though we would never suggest market timing as a prudent activity for long-term investors, we do feel that it’s appropriate to manage risk through small adjustments over time and a commitment to diversification. We will take a deeper look at our positioning moving forward in our quarterly update next month. In the meantime, please don’t hesitate to reach out to your advisors with any questions, or to schedule your next review.

 

 

 


Eric Krause, CFA®

Portfolio Manager
[email protected]

Chris Osmond, CFA® CFP® 
Chief Investment Officer
[email protected]

Advisory services offered through Prime Capital Investment Advisors, LLC. (“PCIA”), a Registered Investment Adviser.  PCIA: 6201 College Blvd., 7th Floor, Overland Park, KS 66211. PCIA doing business as Qualified Plan Advisors (“QPA”).

This commentary is provided for information purposes only and does not pertain to any security product or service and is not an offer or solicitation of an offer to buy or sell any product or service.

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