Now that we are well into the second quarter of 2019, let’s take a look back at the first quarter and how it could shape the rest of the year.
Overall, there were more ups than down in the first quarter, meaning markets around the world were on the upswing.
Here are some of the highlights of the first quarter, and what they could signal moving forward:
March 2019 Inverted Yield Curve
I have a blog post dedicated to the recent yield curves, so check that out if you want a more in-depth overview of what this means.
But to give you a quick synopsis, a yield curve plots bond interest rates by maturity on a graph. Those bonds are typically U.S. treasuries.
The typical graph shows shorter date yields being less than longer date yields, meaning that investors get higher rates on the longer-term bonds. A slope upward means investors expect growth to continue.
But an inverted yield curve graph illustrates that those longer-term bonds have a shorter yield compared to short-term bonds. That can show that investors are less confident in long-term growth, and therefore investing less money into long-term projects.
Typically, they precede recessions. That’s why, whenever the yield curve inverts, investors pay attention.
Interest Rates are Still Up
The Federal Reserve has continued to hold interest rates where they are instead of raising them. There are some broad conclusions you can draw from this. It might be pressure from President Trump to keep interest rates where they are or even drop them, or it could be that the Fed is keeping rates where they are due to a looming recession.
Either way, the Federal Reserve is expecting to keep its current 2.5 percent fund rate through 2021.
These lower rates have contributed to bullish markets. The current bull market is the longest on record, at 10 years old.
Markets Moving Up
Across the board, it was surprising to see how many markets are on the upswing. With the exception of international developed stocks and emerging markets stocks, everything else experienced growth in the first quarter.
We saw particularly significant growth in index returns for the U.S. stock market and global real estate.
Here is some data from Dimensional:
This is why we stay invested in the market. Because even if all signs point to things going in one direction, the market could go in another. Keeping emotions and guesses out of portfolio management is key to long term success.