First Quarter Market Commentary


First Quarter Market Commentary

by David Munn

If you happen to be an investor who only checks your portfolio every 6 months--and your last check was at the end of September--you might think the markets have been serene and uneventful over that time period, having experienced very little change.  But alas, your conclusion would be wrong, though you would have enjoyed the tremendous benefit that comes from not following the day to day turmoil to which other investors willingly subject themselves.

Since reaching new highs in September of 2018, the market has taken stockholders on a roller coaster of prices and emotions.  A fourth quarter that at one point saw price declines around 20%, and included the worst December since the Great Depression (1931), the worst single month (December) since the Great Recession (Feb 2009), and the worst Christmas Eve plunge ever, was followed by a significant rebound in the first quarter, including price increases of 20% or more over the Christmas Eve lows for many parts of the market.

In other words, there has been a lot of movement to essentially go nowhere.

Meanwhile, the bond market and more conservative side of the investment spectrum, which had a rough ride for much of 2018 as interest rates rose precipitously, has also experienced a sharp recovery from fourth quarter lows. 

As we communicated in our previous commentary, we believe the Federal Reserve’s decision with regard to interest rates and global trade agreements were driving much of the Q4 volatility, and would be a primary factor in 2019. Both of these issues appear to be trending favorably in the eyes of investors, and are not commanding the headlines they were several months ago.

Instead, the focus appears to be shifting to the strength of the global economy, the timing and inevitability of the next US recession, and--heaven help us all--the politicking and posturing that is the 2020 Presidential election that is still 19 months away.

All these factors point to continued choppiness in the markets, which we view as a long-term positive for investors, unless you watch your portfolio daily and have untreated high blood pressure.  For your sanity and health we would recommend you address both those issues.