April 8, 2019
John Augustine, CFA, Chief Investment Officer
Looking for a Soft Landing
All markets lifted in the first quarter of 2019, reversing a difficult and unusual fourth quarter of 2018. For diversified investors, this was a very good start to the year, with the average moderate growth mutual fund gaining 9.01% according to our friends at Morningstar.
The quarter featured several new headlines and the continuation of others (Brexit, U.S./China trade talks). Here are some new headlines that will be discussed throughout these pages:
- The Federal Reserve pivoted from thinking it would raise rates this year to putting itself on hold. Fed
officials downgraded their assessment of the U.S. economy this year but are certainly not calling for a
- The federal government shutdown for much of January did impact the economy in areas such as retail
sales, investment, and overall government spending. This will start the economic year off slower than
- Economic numbers from Europe and China took a decidedly tepid turn in the first quarter, and markets
will be watching how the global economy —including the U.S.—gets its footing during the second
- 2019 earnings estimates for the S&P 500 have gone from +8.31% on 12/28/18 to +4.72% on 3/29/19,
according to a weekly Bloomberg survey of sell-side analysts. This will also be an area of focus for stock
markets during the second quarter.
Our investment strategy has moved to a more balanced approach between stocks and bonds in accounts. While we are maintaining only a 25% risk of recession over the next 6–12 months currently, we want to have a balanced approach to portfolios given that GDP and earnings estimates for this year are currently moving lower.
Our equity and fixed income teams are now even more focused on quality of balance sheets and stability of earnings in the companies in which they invest, given the downside estimates for this year. They will discuss their strategies in the following sections.