After some concerns and declines during the summer, major equity markets showed advances in the month of September and finished positive for the third quarter of 2019. The S&P 500 ended the month about 1.7% higher, and up by 1.2% for the quarter. The Dow ended 1.9% and 1.2% higher for the month and quarter, respectively. (Source: Yahoo Finance 9/30/2019)
Some prominent investment themes from earlier in the year continued to surface in the third quarter producing volatile trading, but at the quarter’s end had no real impact. The U.S.-China trade conflict continued to capture investors’ attentions and fluctuated equity markets. The quarter also included the Federal Reserve’s lowering of rates in September for the second time this year. The combination of these events with slowing global economic growth and interest rates produced an inverted yield curve, which is a sign for some of economic downturns. Despite all of this, equity markets still rewarded patient investors. (Source: Morningstar.com 9/30/2019)
In a quarter ending news release, the NASDAQ stated that, “As investors prepare for U.S. corporations to report financial results next month, they could look past recent sluggish growth and find comfort as earnings look set to rebound after the third quarter.” Some strategists argue that just a small amount of economic growth should be enough to support better profit growth, which could help justify high market valuations. "People are overestimating the negative from trade and underestimating the lagged response from a lot of policy easing," said Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis. "It could affect what corporations say when they look ahead," he said. Recent economic data has been mixed, with reports on U.S. labor and housing upbeat, but others disappointing. (Source: NASDAQ.com 9/30/2019)
Investors are still enjoying the longest bull market ever, but two camps of thought still continue to exist. One camp points to the fact that based on historical numbers, like price earnings, that equities are highly overvalued and overpriced. The other camp insists that we are still in a “TINA” market, meaning, There Is No Alternative to stocks. This group feels that until rates rise significantly, this will remain true and that means there could be significant upside in the current market. Equities are not cheap and even the savviest of investors need to have a watchful eye on risk. As financial professionals, we assist clients by providing ideas and suggestions based on their personal circumstances. Short-term interest rates and cash equivalent yields are still historically low. Our goal is to focus on each client’s timeframes and goals.
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