Skip Navigation Documents in Portable Document Format (PDF) require Adobe Acrobat Reader 5.0 or higher to view,download Adobe® Acrobat Reader.

Market Commentary

March 2019



Civista Wealth Management Logo
Frank P. Sudal, CFP®, CFA
Trust Investment Management

Total Returns (%) as of February 28, 2019

 
Fixed Income YTD 1 Mo 3 Mo 1 Yr 3 Yrs 5 Yrs 10 Yrs
U.S Aggregate 1.00 -0.06 2.86 3.17 1.69 2.32 3.71
High Yield 6.26 1.66 3.98 4.31 9.81 4.53 11.50
Global 0.63 -1.31 3.19 -3.65 1.87 -0.24 2.20
Equities
           
U.S. Large Cap 11.48 3.21 1.42 4.68 15.28 10.67 16.67
U.S. Small Cap 17.03 5.20 3.13 5.58 16.67 7.36 16.60
Developed International 9.29 2.55 3.98 -6.04 9.32 2.07 9.56
Emerging Markets 9.01 0.22 6.11 -9.89 15.04 4.13 10.32
Source: Morningstar.  U.S. Aggregate - BBgBarc US Agg Bond.  High Yield - BBgBarc US Corporate High Yield.  Global - FTSE WGBI NonUSD.  U.S. Large Cap - S&P 500.  U.S. Small Cap - Russell 2000.  Developed International - MSCI EAFE.  Emerging Markets - MSCI EM.
 

Equities continued their rally in February, posting another month of robust returns. The Fed’s comments (suggesting rate increases may be on hold for a while), along with somewhat positive trade negotiation progress between the U.S. and China, low unemployment, and sustained job growth, continued to serve as tailwinds. U.S. small cap stocks upheld their leadership, posting a 5.20% return in February. U.S. large cap stocks were not far behind with a 3.21% return. Developed international and emerging market equities increased 2.55% and 0.22% respectively. In fixed income, U.S. Treasuries were fairly stable, with the 10 year yield ending the month slightly higher. High yield bonds were the front-runners, posting a 1.66% return, as investors risk appetite rebounded.

According to the Bureau of Economic Analysis, U.S. real gross domestic product (GDP) increased at an annual rate of 2.6% in the fourth quarter of 2018 and 2.9% for the year. The real GDP increase in Q4 was due to positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, exports, private inventory investment, and federal government spending. Those were partly offset by negative contributions from residential fixed investment, state and local government spending, and increasing imports.

The Organization for Economic Cooperation and Development (OECD) forecasts that the global economy will grow by 3.3% in 2019 and 3.4% in 2020. This reflects their projections for a global slowdown. “The global economy is facing increasingly serious headwinds,” said OECD Chief Economist Laurence Boone. “A sharper slowdown in any of the major regions could derail activity worldwide, especially if it spills over to financial markets. Governments should intensify multilateral dialogue to limit risks and coordinate policy actions to avoid a further downturn,” Ms. Boone said.

While we are optimistic on the U.S. economy and feel that progress with the U.S. and China trade negotiations could be a boon to the markets, we do expect volatility to persist. The strong rally so far this year increases the risk for a near-term pullback. During bouts of volatility, it is important to take a long-term view and not fixate on short-term moves. Timing the market is not an effective strategy.  Cooler heads will prevail.