The second quarter turned out to be a mirror image of the first quarter. Economic fundamentals remain strong, investment markets are either up a little or down a little, and threats of a trade war still loom. And so it goes as we ease into the summer doldrums.
As for the investment markets, stocks in the US are essentially flat-to-slightly-up for the year, while the bond market is down modestly due to the rise in interest rates. Surprising strength in the dollar has led to international and emerging market stocks to decline slightly. As a result, globally diversified investors are essentially flat for the year.
In our first quarter commentary, we discussed the disconnect between seemingly solid economic fundamentals and a flat investment environment. If the economy is firing on all cylinders, shouldn’t that be reflected in rising stock prices? The answer is yes. And no. Generally, the markets are a reflection of how people feel about future prospects for the economy in the long run. But in the short term, not so much. Investment markets hate uncertainty, and the threat of a trade war coupled with geopolitical instabilities have resulted in markets drifting sideways for much of the year. Should these uncertainties resolve themselves in the near term, we would expect market prices to rise based on the fairly robust economic outlook. If the uncertainties persist, you can expect more of the same in terms of sideways markets.
The First Coast Wealth Advisors Team