The S&P 500 wrapped up the third quarter with a steady September, closing about 2% higher for the month and 1% for the quarter (YCharts).  Despite the wide range of risks that have grabbed headlines throughout the year (inverted yield curve, central bank policy, Brexit, geo-political risks, and the US-China trade war), US stocks (S&P 500) are now close to all-time highs.

August has been a somewhat choppy month for the S&P 500 as stocks have reacted to headline news, rumors of trade developments, and tweets, while US fundamentals remain fairly healthy.  The S&P 500 closed the month down by about 2%, but is still up approximately 17% for the year (YCharts). 

On 8.14.19, a closely-watched recession signal flashed red with the inversion of the 10YR-2YR US Treasury yield curve, another part of the yield curve to invert.  An inversion of the yield curve means that long-term rates are lower than shorter term rates (in this case the 10-year US Treasury vs the 2-year US Treasury).

We hope that you and your family are enjoying the summer and managing to stay cool!  The market has continued to heat up over the last couple of months with a rally of more than 8% for the S&P 500 in June and July.  Through the end of July, the index is up about 19% for the year and almost 27% higher than the lows in December, 2018. (YCharts).

After a tough month for stocks in May, June’s performance was a welcome change with the S&P 500 up almost 7% for the month (YCharts). US stocks are currently sitting above all-time highs as of July 3, 2019; however, we still see uncertainty surrounding trade policy, the economy, and political risk.

After closing higher in each of the first four months of the year May brought volatility as the S&P 500 closed the month down about 6.5% amid fresh trade concerns.  Bonds also flashed a warning sign as the yield on the 10-year US Treasury dropped to around 2.14% at the end of the month, the lowest levels since September, 2017. (Bloomberg).

How quickly things can change.  The market’s sharp pull-back in the 4^th quarter of last year bottomed in late December as the S&P 500 dropped almost 20% from the September highs.

Another steady month for stocks in March brought the first quarter to a close with the S&P 500 rallying about 13% over the first three months of the year while international stocks also performed well closing the quarter up about 9.5% (MSCI World ex-US, YCharts), albeit both still down from their all-time highs.  We are encouraged by the continued recovery of the stock market this year

February brought with it another strong month for stocks as markets continued to rally from the Christmas Eve lows.  The S&P 500 finished the month roughly 3% higher which now leaves the index up about 11% for the year, and 18% from the lows in late December, but still about 5% from all-time highs (YCharts).

The Markets

Investors will think of the last quarter of 2018 for years to come, but they won’t remember it fondly. The Economist described it like this,