By Ash Toumayants
Summer is on the way and we are about to launch into the second half of 2019! No matter what the first part of the year held for you personally, the economy’s shaky start definitely improved as time went on. Let’s take a big-picture look at our economy as we reach the midyear mark of 2019.
Markets Are Up
So far, 2019 has been a breath of fresh air for investors, who got the wind knocked out of them at the end of 2018. Not only have markets managed to recover from the tailspin that started at the end of September, but they have reached new highs. U.S. stocks were up 18.59% after the first four months of the year. (1)
Two of the major factors that led to the market drop last year were uncertainty over trade talks between the U.S. and China and fear that the Fed would continue to raise interest rates. Though the trade talks are still an uncertain factor, the strong economy is acting as a buffer and the markets haven’t been as affected. But going forward, this could be a factor in volatility or market drops once again. On the interest rate front, the Fed announced that they would halt rate hikes at the beginning of the year, paving the way for the impressive gains that we have seen thus far in 2019.
Strong Employment Numbers
The economy has also been bolstered by a continually tight labor market. Unemployment rates continue to hover near 50-year lows. This means that employers are having to increasingly compete for talent, which has pushed wages higher. 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 allayed with the March jobs report that exceeded expectations. Overall, the labor market remains robust, 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 concern that the rate of growth is slowing down, first quarter GDP surprised analysts by growing at an annualized rate of 3.2%. (4)
The Fed Got Out Of The Way
Both the stock market and the economy owe some of their current success to the Federal Reserve. The Fed has been helpful not because of what they have done, but because of what they haven’t done.
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 that 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, the negative economic effects have been minimal so far, especially with regards to the stock market. 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 that we are now in the late-cycle phase of the expansion. Several months ago there was a real fear that the end was here, but concerns over a global recession have lessened. 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 quite possible that this ending could last for several more prosperous years.
How We Can Help
You may be breathing a sigh of relief after reading these optimistic updates, but what’s more important than how the overall economy is doing is how your personal financial situation is doing. If your financial plan needs some attention or you want to take advantage of our current market cycle, the team at Strong Tower Associates can help. Contact our office today at 814-325-9806 or [email protected] or quickly and easily schedule a meeting using our online system!
About Ash
Ash Toumayants is a financial advisor and the founder of Strong Tower Associates. For over a decade, he has helped hardworking people across Central Pennsylvania prepare for retirement. Fueled by a passion for helping people see through the veil of confusion that shrouds the financial world, his goal is to educate his clients so they can make more sound choices regarding their financial future. A Penn State graduate, he currently lives in State College with his lovely wife, Noelle, and their four adorable children. Learn more by connecting with Ash on LinkedIn or emailing [email protected].
Advisory services through Retirement Wealth Advisors, Inc. (RWA), a SEC Registered Investment Advisor. Strong Tower Associates and RWA are not affiliated. This Email is being sent by or on behalf of a Registered Investment Advisor. It is intended exclusively for the individual or entity to which it is addressed. This communication may contain information that is proprietary, privileged, or confidential, or otherwise legally exempt from disclosure. If you are not the named addressee, you are not authorized to read, print, retain, copy, or disseminate the Email or any part of it. If you have received this Email in error, please notify the sender immediately by Email or fax, and destroy all copies of this communication. Please be advised that you may conduct securities transactions only by speaking directly with your Investment Advisor Representative either by phone or in person. Requests for securities transactions via Email will not be executed by Retirement Wealth Advisors, Inc. To help protect your privacy, we strongly suggest you avoid sending sensitive information, such as account numbers and social security numbers via Email. Please be further advised that, pursuant to the Bank Secrecy Act, the USA PATRIOT ACT, and similar laws, any communication in this Email is subject to regulatory, supervisory, and law enforcement review. This information is designed to provide general information on the subjects covered; it is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Please note that Strong Tower Associates and its affiliates do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney.
__________
(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/