We all know that time flies, and 2019 has been no exception to that rule! Now that we’ve passed the halfway point of this year, how are the economy and markets faring following the tumultuous and exciting end to 2018? Let’s take a big-picture look at what’s happened in the first half of 2019, where we are now, and what this could mean for the rest of the year.
The Markets Are Soaring
So far, the first half of 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)
Change Is Coming…Eventually
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. At Harbor Wealth Management, we want to help you plan and make educated decisions with your money, regardless of what is going on in the markets. If your financial plan needs some attention or you want to make sure your plan is set up to weather the market ups and downs, send me an email at email@example.com, call my office at 985-605-7185, or quickly and easily schedule a phone call online today!
About Jeremy Smith
With nearly two decades of experience in the financial services industry, Jeremy Smith serves as a dedicated and knowledgeable financial advisor and the founder of Harbor Wealth Management. He specializes in serving retirees, pre-retirees, small business owners, and widows, providing a comprehensive array of investment management and financial planning services. Jeremy aims to serve his clients as a financial guide who is here for their every need, helping families find lasting plans so they can focus on what matters most to them. To learn more about Jeremy, visit www.myharborwm.com or connect with him on LinkedIn. You can reach Jeremy directly at firstname.lastname@example.org or by calling his office at 985-605-7185.
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The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. You should discuss your specific situation with the appropriate professional. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.