Mid-Year State of the Market 891266

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1st Half Recap Q1 was one of the best quarters in recent memory The markets took off Government shutdown ended The Fed reversed its rhetoric on raising rates Optimism for China Trade Deal – later shattered and a trade war with China ensued S&P 500 & Nasdaq hit all-time highs Volatility returned in April and May was rough Nasdaq & S&P 500 – 4 straight weeks of losses The Dow - 6 weeks of losses Economic Reports were strong Earnings were good

1st Half Recap By late May, Markets bounced back Nearly all S&P 500 companies reported earnings by late April 76% reporting positive earnings per share surprises 59% reporting positive revenue surprises Unemployment bounced up to 4.0% during the government shutdown; dipped back down to 3.6% in Q2 Q1 2019 GDP – grew 3.1% The Federal Reserve shifted its stance on interest rates – now talking about cutting rates. The Nasdaq and S&P 500 were back to record highs U.S. equity markets ended the month of June up over 7% All in all – it’s been a rollercoaster but we’ve come out ahead so far!

Mid-Year Outlook + 4 - 6% Predictions: No recession this year Slower, more volatile 2nd half to the year Potential for short-term corrections But overall expecting another 4-6% increase What could impact this one way or the other? A deal with China Interest Rate Cuts Tension in the Gulf + 4 - 6% My top 3 concerns are as follows A deal with China . First up is the G 20 summit. Markets were upbeat after Trump and Xi confirmed that trade talks were resuming. If we get signals that a deal is near and there is follow through we will see a very strong market in the summer and the fall. If we do not we can expect to be punished again just like we were in May.   Interest rate cuts. Following its June meeting, the Fed had a noticeable shift in its language regarding possible rate cuts. As mentioned before, Fed Funds Futures are pointing to the high probability of a rate cuts, maybe even as early as the Fed’s July meeting. There could even be a possibility for multiple rate cuts this year. If the Fed can walk this tight rope markets will be fine, if economic data clearly points to a need to tighten or of a risk of inflation and the Fed signals it may not cut or even raise rates expect the market to react similarly to what I just described if there is not China deal. Finally, Tension in the Gulf - Iran has been pushing our buttons lately, attacking two tankers in the Strait of Hormuz and shooting down a U.S. Navy reconnaissance drone. Tensions are high, although President Trump did show restraint when he called off a retaliatory strike at the last minute. The situation with Iran could simmer over the hot summer months. This is the wildest of wildcards and markets don’t like oil supply disruptions or surprises in general. For the second half of 2019 I would stick with equities as your plan permits. They are still attractive but there is way more probability that markets will not rise as much in the second half as they did in the first half of the year. My prediction is another +4-6% to the upside in the second half, with the 10 year treasury below 2% that’s not too bad! We just have to make sure the Fed and China trade talks deliver.  We’ll need to do something with this following G20 summit on June 28-29

What Now? Stay disciplined Review your goals with your advisor – have they changed? If not, stick with the plan! As always – Diversify!