Our Midyear 2019 Economic Update
By Preston Rosamond
We are now well into 2019, and things are looking much better than they did only six months ago. Now is a great time to pause and take a look around at the economy.
The Markets Are Soaring
So far, 2019 has been a much-needed breath of fresh air for many investors, several of which just got the wind knocked out of them there at the end of 2018. Not only have markets managed to recover from the tailspin that started at the end of September, but several have even continued on to reach new highs. U.S. stocks were up 18.59% after the first four months of the year. (1)
Of the many factors that influenced the market drop last year, two of the major factors were uncertainty over trade talks between the U.S. and China and fear that the Fed would continue to raise interest rates. And while these do remain unsolved, relations with China have improved greatly, leaving investors optimistic. The Fed also announced they would halt rate hikes at the beginning of the year, paving the way for the impressive gains we have seen thus far in 2019.
Employment Is Strong
The economy has also been reinforced by a continually tight labor market. Today, the unemployment rates continue to hover near 50-year lows. With an employment market like this, employers are having to increasingly compete for talent, which has begun to push wages even higher. In fact, hourly wages are up 3.2%, (2) which is good for workers but will lower profit margins for businesses.
There was a moment of worry when the February jobs report was released with appallingly low numbers. However, fears were calmed with the March jobs report, which exceeded expectations. Overall, the labor market remains robust, even with slower job growth due more to a lack of qualified workers than anything else. (3)
GDP Is Growing
Gross domestic product (GDP), which measures our nation’s economic output, continues to grow. While there has been a bit of apprehension over the slowing rate of growth, first quarter GDP surprised analysts by growing at an annualized rate of 3.2%. (4)
The Fed Got Out Of The Way
Not so much because of what they have done, but because of what they haven’t done, the Federal Reserve has been a help to the current success of both the stock market and the economy.
After five successive quarters of rate hikes, the Fed finally pushed pause in March. Instead of continuing to raise rates, they indicated that they will hold off for 2019 to see what happens with the economy. This was enough to renew investor confidence and drive the impressive stock market gains we have seen so far this year.
The World Isn’t Too Far Behind
While the U.S. economy continues to chug along, the rest of the world isn’t doing too bad either. There were concerns that China, the world’s second largest economy, was slowing, but some strategic moves by the Chinese government and a surge of industrial production led to better-than-expected GDP growth of 6.4% for them in the first quarter. (5)
Brexit is still a thorn in Europe’s side, as it seems the British government cannot agree on an exit plan. However, especially with regards to the stock market, the negative economic effects have been minimal so far. And thanks to continued growth worldwide, the MSCI All Country World Index is up over 15% so far this year. (6)
But It Can’t Last Forever
There is no doubt we are now in the late-cycle phase of the expansion. Months ago, there was a real fear the end was here, but concerns over a global recession have begun to subside. While we are seeing slowing in some quarters, the underlying economic fundamentals remain strong. We may be near the end of this expansion, but it’s still possible this ending could last for several more prosperous years.
How We Can Help
The Rosamond Financial Group is a full-service financial planning and investment advisory firm specializing in total asset management. Whether you need investment planning, retirement forecasts, insurance evaluation, tax development plans, or education planning, we can help you travel the road and arrive in good condition.
Call my office at 830-798-9400 or email smrosamond@rosamondfinancialgroup.com. Or, if you prefer to easily schedule a meeting via our online calendar, click here to book your free introductory meeting today!
About Preston
Preston Rosamond is a financial advisor and the founder of The Rosamond Financial Group Wealth Management, LLC with nearly two decades of industry experience. He provides comprehensive wealth management and financial services to individuals, professionals, and families who enjoy simplicity and seek a professional to help them pursue their goals. Preston personally serves his clients with an individual touch and a sincere heart, and his servant’s attitude is evident from the moment you meet him. Learn more about Preston or start the conversation about your finances with him by emailing smrosamond@rosamondfinancialgroup.com or schedule a call with our online calendar.
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(1) http://news.morningstar.com/index/indexreturn.html
(2) https://www.carsonwealth.com/insights/market-commentary/weekly-market-commentary-april-8-2019/
(3) https://www.carsonwealth.com/insights/market-commentary/weekly-market-commentary-april-8-2019/
(4) https://www.carsonwealth.com/insights/market-commentary/weekly-market-commentary-april-29-2019/
(5) https://www.carsonwealth.com/insights/market-commentary/weekly-market-commentary-april-22-2019/