Market Watch: July 2019

Posted 25 Jul 2019 by Rick Irwin, CFP, CLU

After a difficult close to the year, stock markets globally rebounded sharply in the first half of 2019, erasing the losses of Q4 2018 and quickly moving to new highs.  The catalyst for the rebound was the US Central Bank, the “Fed”, abruptly reversing course on plans to hike interest rates further, citing an uncertain global environment rather than any weakness in the US. Returns may be more muted for the balance of the year, however, given the big gains in the first half and the fact that other major issues that had worried markets (namely the ongoing trade war and the continue quagmire of the UK Brexit situation) have not neared any resolution.  

The press continues to reinforce that we are currently in the longest bull market in history, implying that bad times are nigh. It’s true that this is the most significant “up” market as measured by duration, but the magnitude of the overall economic recovery is in line with the normal bull market expansion and, coming on the back of the worst stock market decline in modern times, it’s not surprising to see an above-average recovery period.  

Managers I’ve spoken with feel that the bite of tariffs and generally slowing economic growth globally are likely to compress prices, or at least limit gains, at some point in the not too distant future but this is of course unclear as always. Diversification, and proper risk balancing, are very important as we continue to move into what is quite likely the late stages of this economic cycle. The US, and growth stocks specifically, have enjoyed the lion’s share of returns in recent years but opportunities exist globally for stock pickers and this is likely to be an environment when active managers thrive.