March 2019 market returns were less than spectacular, but they were mostly positive as we wait and see how the global economic growth picture develops. Importantly the equity markets held on to the gains built over the previous three months.
The S&P 500 Index led the way higher, with a fresh list of growth stocks taking the leadership role from the expensive and complicated FAANG stocks. (Facebook, Apple, Amazon, Netflix, and Google) Euro stocks moved higher with gains that lagged the US equity markets. Valuations for European equities are cheap relative to the US but the corporate and governance environment in Europe is difficult. The wild card to jump start rallies in European and Asian equities could be Chinese economic reforms which have been in place since mid-2018.
Fixed income markets fired and hit three-point shots all month. Benefiting as interest rate moved lower when the Federal Reserve minutes revealing broad support from FOMC members for no more policy interest rate increases. In response to the clarity provided by the Fed, interest rates dropped by approximately 20-25 basis points along the yield curve.
Transparency in Fed policy gives financial asset investors and business leaders an element of clarity to make capital investments and contribute to economic growth. The Federal Reserve Chairman has made it very clear they are focused on economic data for direction, which reduces the potential for surprises. The global economy must remain strong enough to suppress recession fears but weak enough to keep policymakers on the sidelines.
With the gains achieved in risk assets from the late December bottom intact and broad uncertainty in the future economic picture, diversification of asset classes and staying invested relative to your long term investment strategy remains an effective policy.
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John Kirby is a Principal and co founder of Laurentide Advisory