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Weekly Market Digest: Stocks Finish Q1 on a High Note

Stocks finished a torrid Q1 on a high note, marching higher on reported progress on a trade deal with China and Mueller report findings that there was no direct collusion with Russia. Brexit chaos continued, with the possibility of a no-deal exit increasing. Markets outside of Europe were not phased. Lyft punctuated the strong quarter with a robust IPO valuing the company at $22 billion.

Weekly Returns

S&P 500: 2,834 (+1.2%)
FTSE All-World ex-US (VEU): (+1%)
US 10 Year Treasury Yield: 2.41% (-0.03)
Gold: $1,292 (-1.6%)
EUR/USD: $1.122 (-0.7%)

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Major Events

  • Monday – President Trump signaled he would support release of the Mueller report which he claimed exonerates him regarding Russian interference with the 2016 election.
  • Tuesday – The House came up short in a measure to overturn President Trump’s veto of efforts to invalidate his declaration of national emergency on border control.
  • Wednesday – Global bond yields fell following comments from the ECB suggesting it would delay interest rate hikes.
  • Wednesday – UK Prime Minister Theresa May pledged to resign if her Brexit deal was passed.
  • Thursday – Wells Fargo CEO Tim Sloan resigned, suggesting it was time for outside leadership as the bank tries to recover from previous scandals.
  • Friday – Lyft staged a successful IPO, valuing the company at $22 billion.
  • Friday – Britain edged closer to a general election and the potential of a no deal Brexit as Parliament rejected Theresa May’s deal for a third time.

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Our Take

The first quarter was a lot like watching the dismal fourth quarter of 2018 in reverse. Starting last October, stocks began a swift decline driven primarily by three fears: trade war, rising interest rates/yield curve inversion, and slowing earnings growth. For Q4 overall, US stocks fell 14%. Global stocks finished the year down nearly 10%.

So far this year, each of those fears has regressed. Significant progress has been made toward reaching a trade agreement with China, the Fed has changed course and now does not expect to raise short term rates in 2019, and earnings results were “good enough”.

US stocks responded with their best quarterly results since 2009, up 13.9% (VTI), International equities, which held up better in Q4 rose less in Q1 +10.4% (VEU). Not everything was a mirror image. Longer term interest rates fell in Q4 and continued falling in Q1, driving bond prices higher. Some view this as bullish for stocks because lower interest rates encourage investment, support housing prices, and justify higher valuations. Others see it as a bearish indicator that economic growth will slow.

The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

Craig Birk, CFP®
Craig Birk leads the Personal Capital Advisors Investment Committee and serves as Chief Investment Officer. His focus is translating improvements in technology into better financial lives. Craig has been widely quoted in the Wall Street Journal, Bloomberg, CNN Money, the Washington Post and elsewhere. Prior to Personal Capital Advisors, he was a leader within the portfolio management team at Fisher Investments, helping assets under management grow from $1.5 billion to over $40 billion. Craig graduated from the University of California at San Diego and has earned the Certified Financial Planner® designation.
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