The 4th quarter 2018 and the 1st quarter 2019 could be called A Tale of Two Markets. As Charles Dickens once put it, “It was the best of times, it was the worst of times…”  From October to December last year, suddenly there was going to be no further economic growth, a recession was deemed near, the Fed was hawkish and expecting to raise interest rates and trade policy was, at best, uncertain.  As we mentioned last quarter, “We could see the typical V-bottom and a strong rally off the lows.”  From January through March, we did see one of the strongest rallies off the lows ever witnessed.  In fact, instead of the typical 50-60% recovery before we try to test the lows again, there was only a market wiggle at that point. We have now regained all of the losses from the ugly 4th quarter 2018. We have talked a lot about the typical V-bottom formed after a market correction, but the picture below is worth a thousand words.

The volatility we saw during this time definitely tested investor resolve. That is why we reminded our clients last quarter, “When this happens, it is important to remember that the fundamentals always win in time.” The missed opportunity can be as devastating as the loss itself when we make emotional decisions.

During the 1st quarter 2019, many of the uncertainties were proven to be just that. The Fed has become more dovish, and interest rate hikes are not expected the balance of the year. Growth may have slowed a bit but we are still growing nonetheless.  Trade policy is less of a distraction, in fact, a China trade deal is expected relatively soon.  We are starting to see economic recovery in Europe, and in the emerging markets including China. Corporate earnings growth will likely be better than the tamped down expectations.

Fundamentally the domestic economy is still strong.  In recent years, economic growth in the 1st quarter of the year has been subdued, but has accelerated the balance of the year. We expect this trend to continue and remain intermediate to longer term bullish. Subscribe to the Latest News section of for further updates and mid-quarter commentary.