The Rally in 2019 – A Tale of Two Assets
- So far, 2019 has proven to be a very different year in markets compared to 2018. Prospects of a U.S./China trade deal and a “patient” Federal Reserve (Fed) have led to a sharp rally, reversing the losses experienced in 2018.
- Global stock and bond markets are painting two different forecasts of the global economy: Stocks have soared from December lows, reflecting positive investor sentiment, while bond yields have fallen. Bonds have also posted positive returns, reflecting worsening economic conditions.
- The economy continues to grow in 2019, albeit at a slower pace, and the probability of a recession remains low. These factors should support a healthy stock market over the intermediate term.
- In the near term, investors should remain cautious when market sentiments go from being far too pessimistic in December 2018 to far too optimistic in 2019 – a long way for the pendulum to swing in such a short period.