First Quarter 2019 Snapshot

– by Chip Sawyer, CFA® and Chief Investment Officer

It has been a great start to the year for both the stock and bond markets, which is a welcome change from last year when cash was the best performing asset. Most equity indices were up double digits for the first quarter, and the bond market was up over 2%.

The majority of the quarter’s gains occurred in January when the market correctly anticipated the Fed reversing their hawkish tone from late last year. In general, investors preferred the more cyclical sectors as tech, industrials, and energy were the best performing sectors while healthcare, staples, utilities, and financials were the worst performing sectors.

We have yet to see a confirmation of this recession signal from the Leading Economic Indicators Index, which also does a good job of predicting recessions. Therefore, we still believe this bull market will continue.

The end of March saw the first inversion of the yield curve since 2007 when the 3-month Treasury yielded more than the 10-year Treasury for a brief five days. That has since reversed with the 10-year currently yielding about 8 basis points more than the 3-month. Historically, inversions like this have been a pretty accurate indicator signaling a recession is on the horizon.

However, in none of the previous seven inversions was the 10-year Treasury yielding less than 5% (currently, the 10-year is yielding about 2.5%). Current short-term rates of 2.5% would not have come close to inverting the curve in the past, so it may very well be “different this time.” Clearly, our 10-year Treasury would be much higher if not for the ridiculously low-interest rates seen overseas (where trillions of dollars of debt has negative yields).

We have yet to see a confirmation of this recession signal from the Leading Economic Indicators Index, which also does a good job of predicting recessions. Therefore, we still believe this bull market will continue.

If you want to know more or would like us to review your personal financial picture and offer our best advice, we encourage you to give us a call!

April 2019. Westover Capital Advisors, LLC. All rights reserved.