The first half of 2019 brought very strong results for financial markets. Both equity and bond investors saw positive results leaving investors in a happy mood. The Dow Jones Industrial Average (DJIA) enjoyed its largest June gain since 1938 and the S&P 500 experienced its best first half in two decades. (Source: CNBC.com 6/28/2019)
Concerns of an economic slowdown overshadowed the quarter for many investors. In May, the major equity indexes started heading lower. Although the quarter’s final results showed an upward move of 3.8% for the S&P 500 and 2.6% for the DJIA, these gains came with an extension of the volatility that investors have been experiencing since October of 2018. (Source: Wall Street Journal 6/29/2019)
The strong six-month period that both equity and debt securities have enjoyed has been tied to the pivot that the Federal Reserve has made on its interest rate outlook. In 2018, the Federal Reserve’s stance was to raise short-term interest rates multiple times. Early in the month of January 2019, Fed Chairman Jerome Powell, switched that thinking when he announced that the Fed would be “patient” in boosting rates. In late spring, the dialogue from the Fed shifted toward indicating that their next move might be a rate cut. This shift helped to create the environment which led to attractive returns for both stock and bond investors.
(Source: Barron’s 7/1/2019)
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