Published May 13, 2019
The market began the year with its best start since 1998. After the jarring fourth quarter of 2018, the broad market powered its way to all-time highs. By the end of April, the market had gained 25 percent from its 2018 Q4 bear market low and 545 percent from the March 2009 financial crisis lows.
Gross domestic product (GDP) growth is running at about 3 percent – a significant improvement from the 2 percent of just a year ago.
April saw 265,000 new jobs added; that is a very strong number. Unemployment reached lows not seen since December 1969. There are a record 7.5 million job openings in the U.S.
Inflation remains low, but so do wage gains. The Federal Reserve, under pressure from President Trump to cut interest rates, declined to do so; nevertheless, the market priced in one rate cut for the rest of the year anyway.
The outlook for interest rates remains somewhat cloudy because of White House pressure, but Federal Reserve Chairman Jerome Powell will likely keep to the Fed’s established course, at least until the end of the year. That is, of course, unless Powell is forced out of his job. So far, efforts to restock the Fed with Trump supporters have failed, largely because of the lack of support for the potential replacements. The result is that interest rates will likely remain where they are until at least the end of 2019, even though a strong argument could be made to raise and “normalize” rates. Sooner or later the markets will need support from the Fed, so the Fed needs some “dry powder.”
In the face of many obstacles, such as China-U.S. […]