US Equity Market Returns Q1 LTM
S&P 500 (Largecap) 13.5% 8.8%
Russell 2000 (Smallcap) 14.5% 1.7%
Nasdaq 100 (Tech) 16.9% - 13.4%
- Economic growth jumps to 3.2% in Q1
- US jobs market remains robust
- Housing market turns corner as affordability improves
- US equities bounce strongly, led by Tech
US economic growth jumps to 3.2% in Q1 2019, beating economist expectations for 2.5% growth in Q1. The US economy grew at a faster pace than expected in the first quarter and posted its best start a year in four years. The data assuaged fears that the longest government shutdown in history would materially impact growth. The federal government ceased operations for 35 days between late December and 25th January. Personal spending, the biggest component was up 1.2%, two tenths more than expected plus intellectual property sales rose +8.6%. One negative was the downward revision to growth in Q4 2018 however growth for the full year 2018 hit +2.9%, the fastest since 2015.
US jobs market remains robust, adding 200,000 jobs per month in 2019 thus far. The unemployment rate dropped to a 49-year low of 3.6%, pointing to sustained strength in economic activity. Employment gains are strong enough to dispel any immediate concerns over the health of the economy. Job growth is well above the 100,000 needed per month to keep up with growth in the working-age population, and maintain a steady unemployment rate. Strong job readings in March and April was further evidence that February’s paltry 56,000 increase in jobs was an anomaly.
Retail sales jump as personal spending rises. Stronger-than-expected retail sales in March confirmed the retail slowdown in January and February was temporary. As the lengthy government shutdown ended and confidence recovered following the fourth-quarter market rout, consumer spending recovered in full force. Retail sales rebounded 1.6%, while consumer sentiment rose to its highest level since October.
US housing market buoyed by fall in mortgage rates. Mortgage rates peaked in November last year at 5%, the highest in 7 years, discouraging home buyers however following the FEDs policy shift mortgage rates have fallen to sub 4%. This environment has lured buyers back into the housing market, with existing-home sales climbing nearly 12% in February.
The US equity market capped its best quarter since 2009 and its strongest start to the year since 1998. The US equity market climbed in March to end the first quarter in positive territory amid hopes for a trade deal with China and less restrictive policy from the FED. US corporate earnings season is progressing positively. To date, 76% of US corporates have delivered earnings ahead of expectations and 60% of companies have beat revenue expectations. The oil price rebounded to close above $60 a barrel for the first time since early November, capping its best quarter since 2009 and boosting energy stocks. The dominant Technology sector, having suffered a difficult Q4, performed especially well with the Nasdaq 100 delivering +16.9% in the first quarter.
"Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver." --Ayn Rand