April Adds to 2019 Strength, But Confusing Messages Persist – Week Ended 4/18/19

It should be news to no one at this point that 2019 is off to a fantastic start – at least for investors who continued to “stand in the pocket” despite getting repeatedly knocked down during 4Q’18.  As many market participants believed at the time, the reaction by the financial markets to perceived slowing of economic growth that was anticipated (and is playing out) during the 1Q was overdone.  But in fairness to investors, perceived Government missteps (or perhaps more fairly described as inflexibility) both on monetary policy evolution (Fed tightening) and Trade (US-China) made it hard to maintain confidence in officials being able to do the right thing for the US economy in the face of persistent international economic weakness and uncertainty.  Since that time, sentiment on both items has turned more favorable, leading to a swift recovery for domestic equities.  Investors also find themselves questioning whether they have been too pessimistic over international economic and financial market prospects.  Significant economic, regulatory, and political uncertainties hampered international investing success for much of this 10-year cycle, but lesser acknowledged is how much has been done to improve monetary policy transmission in support of the banking system and economic growth.  This sets international markets for potential out-performance especially when considering valuations overseas are more attractive than domestic on a number of measures and the currencies are cheap relative to USD.

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“Age is Just a Number” – Nvest Nsights Q1 Newsletter Articles

The 1st quarter was one of the strongest starts to a new year in the last two decades.  It followed an equally unsettling period over the final 3 months of 2018 which significantly damaged investor sentiment, making the swift rebound another textbook example revealing just how challenging would be market timing.   This quarter’s newsletter contains four brief articles.  “Reflections on a Bull Market” and “Age is Just a Number” provide perspective on the progress of the current bull market  and economic cycle, respectively, which are both long by historical standards but need not die due to age alone.  “No Beauty Contest” shares why the treasury yield curve is an indicator investors are monitoring closely, especially now, while “Style Differences Exist” provides color about how we are positioning client accounts with consideration for managing portfolio risk.

The full printer-friendly version of our newsletter, including data tables for selected mutual fund and ETF performance as well as portfolio benchmarking, can be downloaded here: NVEST NSIGHTS 1Q.

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1Q Resoundingly Strong; but Conflicting Signals Emerging – Week Ended 3/29/19

The 1st Quarter concluded with each month firmly in positive territory and a cumulative advance for the S&P500 of +13.6% – a sharp reversal from the experience suffered closing out 2018.  Interesting fact: since 1950 there are only 19 examples of the S&P500 starting a year with positive performance in January, February, and March and returns over the following 9 months historically came in above average (though mid-year corrections were just as likely).  The early year improvement has been most attributed to a decidedly more deal-seeking tone on the issue of US-China trade and a US Federal Reserve that now appears firmly on break from any additional interest rate hikes or incrementally tighter monetary policies.  While those developments are welcomed, the forward-looking message to be gleaned is far less clear.  In recent weeks for instance, smaller-size companies along with transportation and industrial sectors have been laggards.  Too, it is widely expected that the US economy has entered a decidedly more sluggish period of economic growth and safe-haven bond yields have drifted lower; a condition usually accompanied by a risk-off mood and caution.

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