April Market & Portfolio Update
As you hopefully put your tax-filing to rest today, I want to update you on economic/market trends and portfolio transition.
Please let me know if you have any questions or concerns as I’m always happy to elaborate!
- Portfolios: We continue to see the U.S. stock and bond markets improve after the Dec meltdown for stocks. The S&P 500 is +16% YTD, essentially putting us back to the Oct 2018 levels I referenced when recommending we begin taking profits and re-positioning. We began this process for most accts in March, and will continue to do so as prices reach appropriate levels.
To-date, mid-cap growth, energy, and some international have been liquidated. Replacing these growth-focused areas has been the recession-portfolio stalwarts of bonds, preferred stocks, and gold – all of which have shown their stability over the past few months.
Next liquidation phase will be the small-cap value, consumer staples, and utilities. These 3 areas continue to match or out-perform the S&P 500. I am forecasting one more leg up in this cycle, likely to reach our sell-point by early summer.
- Markets: It’s all about Q1 earnings over the next few weeks. Banks are leading the charge, with both positive and negative results. The overall consensus is for a -4% decline in S&P 500 Q1 earnings year-over-year. Obviously, this is a negative for markets given the double-digit gains we saw in 2018. Tax relief is far in the rear view mirror now, and global economic forces continue to be a headwind, posing a challenging environment.
- Trade: The U.S.-- China trade situation continues to play out, taking longer than we expected. With a potential meeting in June between the leaders, I believe we’ll see a deal done that removes tariffs for both countries. However, much of this expectation is already priced in the market. Brexit continues to loom overhead as well, as negotiations continue to drag on. Anything less than a clear exit strategy for Britain from the EU will be a major decline for international markets.
- Interest Rates: The yield curve continues to remain inverted at various stages along the curve, and this continues to be my #1 confirmation that we will see the beginnings of an economic and stock market decline by yearend. Although my view is contrarian, since many pundits seem to think “it’s different this time,” I choose to stand by historical lessons learned. The Federal Reserve’s soft tone towards interest rates also signals their concern about upcoming economic forecastes into 2020. Although some think they will actually lower rates in 2019, I disagree. If anything, I anticipate the Fed will reduce their monthly decreases in Treasury and mortgage-backed securities ($50b/mo), effectively “lowering” market interest rate pressures.
I wish you all a fantastic week ahead and once again thank you for your trust and confidence in my stewardship of your wealth!
Paul
Paul Wildberger, CFP®, MBA
President, Integrity Private Wealth Advisors, LLC
10000 N. Central Expwy #400
Dallas, TX 75231
214-729-1460
