Are the Markets Teetering on the Precipice or are More Gains in the Offing?
I’m really looking forward to this quarterly update.
One of the reasons I write quarterly updates is to bring financial trends into focus.
We all read the financial headlines which chronicle the daily and weekly gyrations of the markets, but when smoothed out, what are those actions really saying?
And this quarter has definitely seen ups and downs – not huge moves to make you skittish – but enough to mask the true direction the markets are trending.
Which is why I’m looking forward to writing this quarterly update post so the picture, for me, and hopefully, you, too, is a little more clear.
With that said, let’s dive right in to the numbers and see where we are.
2019 Second Quarter Returns
The Dow Jones Industrial Average increased 671.29 points or 2.59%.
The S&P 500 rose 107.36 points for a 3.79% increase.
And the Nasdaq climbed 276.92 points for a respectable 3.58% gain.
As you can see, all three major indices started a downward slide in early May which ran through early/mid June, at which time the tide turned and stocks, once again, began their upward climb.
At the end of Q2, each index posted a respectable gain after trudging out of the mid-quarter valley.
So, overall, a good end to a choppy quarter.
As I looked over the Q2 charts, I got to wondering what the markets actions look like over a longer period.
So I picked 5 years as a yardstick and created the charts.
Let’s have a look.
The Markets Over Five Years
The Dow has jumped 9,899.52 points or 58.55% over the past five years.
The S&P 500 moved up 1,012.23 points for a 51.55% increase over the 5 year period.
And the Nasdaq has ballooned 3,706.92 points for a whopping 84.41% gain the past 5 years.
What do these charts tell us?
Well, aside from the fact that markets have climbed steadily over the past five years, especially beginning around 2016, not much.
But, it’s interesting to see the overall, longer-term trend.
The big question, though, is will the trend continue?
2019 Going Forward
In my first quarterly update for 2019, I asked:
Should we expect this outsized growth to continue for all of 2019?
To which I answered:
If I had to put money on it, I’d say no.
So far I’d be losing that bet. Decent sized growth has continued.
But we’re only halfway through 2019, so what happens in the coming six months remains to be seen.
Some of the issues I saw dampening the markets are still looming. Slower economic growth overseas which may be impacting U.S. businesses, and the trade deals, primarily with respect to China, are still floating within sight of our steaming-ahead U.S. economy. They’re giving the seas a little chop right now – as evidenced by the market dips this past May/June – will they move out of course as we barrel ahead or stand firm causing a more tumultuous ride? We’ll see.
But a bigger factor to where the markets, and the U.S. economy, head in the coming months is the actions by the Federal Reserve with regard to interest rates.
It’s almost a foregone conclusion by many, and especially the markets themselves, that the Federal Reserve Bank will lower interest rates in the next month or so.
Interest rates are typically lowered when economic conditions are questionable, or on a downward trend. That’s not what we’re currently seeing in the U.S.
And, let’s keep in mind U.S. interest rates are only about halfway to what is historically considered “normal” levels. The Fed was on its way to normalizing rates when the markets yelled STOP last December, resulting in a significant dropoff.
Since then, continued interest rate increases have fallen by the wayside, replaced by talks of interest rate cuts.
Which seems like the path that’s likely to be taken.
Should the Federal Reserve begin cutting interest rates, the markets likely will move a bit higher…but maybe not that much due to the cuts are already being factored in by much of the investment community.
Where we might see market moves is to the downside should the Fed decide interest rate cuts really aren’t warranted.
And, honestly, they aren’t. But no one’s asking me.
So, what happens with the markets in the remaining six months of 2019 will largely depend on Fed actions followed closely by trade matters and whether foreign economies stabilize/begin to grow or overseas weakness continues and spreads into the U.S. to a greater degree than it already has.
Considering the 5 year growth we’ve seen, the potential economic headwinds that remain and the odd reliance on the Fed maintaining low interest rates, I’m thinking the markets are unlikely to rise too much more this year.
But, if the Fed dials in an interest rate cut or two, who knows.
The good news, unless something unforeseen happens, we shouldn’t see a major market sell off any time soon.
And now to my typical close to these quarterly updates…
We at Savings Beagle are not investment advisors. It’s not our goal to encourage you to put your money into the markets, or to sell if you already have invested.
Rather, it’s to provide information to help illustrate the current state of the U.S. markets which can help guide your financial decisions.
Saving money – whether by investing in stocks, bonds or by simply putting a set amount into a savings account on a regular basis – is critical to your future financial well-being.
And we’re here to relay money saving deals and tips to make finding that excess cash that you can put to work a little easier.
If you haven’t already, bookmark our site, follow us on Facebook, join us on Twitter or subscribe to our posts to ensure you receive every savings opportunity we’re able to pass along.
Saving money and planning for the future’s hard – we’re here to help make it a little easier.
Stock charts courtesy of Morningstar.com
