The “Harry Kizirian Award” was given to Building Futures
In recognition of their dedication to provide comprehensive programs and career opportunities to all those who desire a job in the construction trade and enroll in the pre-apprenticeship program.
Market Review – December 2019
EQUITY: US equities extended gains for a third straight month as the risk-on sentiment persisted throughout November. The positive news flow on trade discussions between the US and China as well as the Fed rate cut helped drive gains domestically. S&P 500 earnings season produced better than expected results with 75% of companies beating EPS estimates and 59% beating revenue estimates.
FIXED INCOME: US bond markets declined modestly during November, as the Bloomberg Barclays US Aggregate returned -0.05%. Treasury yields inched higher across the maturity spectrum. The spread between 10yr and 2yr US Treasury yields steepened to 18 basis points. The Fed appears content with current interest rate policy absent a material change in the economy.
The “Roger Schonning Award” was given to International Yacht Restoration School;
In recognition of their goal to educate students in the Art & Science of Boat Building and Restoration, Marine Systems, composites Technology & Digital Modeling & Fabrications.
Market Review – June 2019
ECONOMY: Consumer confidence and sentiment indicators continue to show strength in the face of increased trade tensions and slowing economic growth. Fed Chair Jerome Powell addressed recent developments involving trade negotiations as something they are closely monitoring. He emphasized that the Fed remains patient and will act appropriately to sustain the expansion and accomplish their dual mandate of maximum sustainable employment and price stability.
Market Review – March 2019
ECONOMY: US economic growth decelerated to close out 2018 and recent data points to a sluggish start to the year. US GDP expanded by 2.6% during Q4 2018, which is lower than the increase of 3.4% in Q3 2018. Economic data largely missed expectations in February as the Citi Economic Surprise Index declined to its lowest levels since 2017. Consumer sentiment, ISM manufacturing, and employment growth headlined the slowdown in data.
Global equities expanded their 2019 gains as February proved to be another solid month for risk assets. The S&P 1500 Index, a good representation of the US stock market, advanced 3.31% for the month. International stocks also moved higher with the MSCI All Country World Index ex US increasing 1.95%.
US Bonds exhibited mixed performance in February as the Barclays US Aggregate Bond Index declined 0.06% for the month. Treasury yields inched higher and traded in a narrow range during the month.
Market Review – February 2019
ECONOMY: The synchronized global expansion which was widely cheered heading into 2018 has instead been less consistent and more moderate than expected. Global economic metrics weakened during the fourth quarter contributing to increased volatility in financial markets. The Citi Economic Surprise Index, which measures actual published data versus expectations, closed the year in negative territory or below consensus expectations for several economic regions in the world. The less than robust economic data together with ongoing trade conflicts prompted the International Monetary Fund (IMF) to downgrade its global GDP growth forecast for 2019 from 3.9% to 3.7%, which is comparable to levels achieved in 2017 and 2018.
As the US economy approaches the tenth year of the current expansion, investors are increasingly focused on the possibility of a slowdown. After largely decoupling from the rest of the world with strong growth in the second and third quarters, US growth is projected to moderate in coming years.
Market Review – January 2019
ECONOMY: The prospect of slower global economic growth has contributed to elevated financial market volatility. Economic data remains supportive of further global expansion, but growth forecasts have been reduced as downside risks have increased. Tighter central bank monetary policy and restrictive trade policies have contributed to much of the uncertainty. In December, the Federal Open Market Committee (FOMC) increased short-term rates, while lowering their forecast for additional rate hikes in 2019. In addition, the FOMC projected US GDP growth to decline from a cycle high of 3.0% in 2018 to 2.3% in 2019.
EQUITY: Global equity markets posted significant losses in December placing several indices in bear-market territory, down 20% from all-time highs established earlier in the year. The S&P 500 Index declined 9.03% for the month and posted its first calendar year loss since 2008. International stocks fared better as a mean reversion trade narrowed the equity performance dispersion across global markets for the year. Large price declines across the board for equity markets coupled with strong earnings have reduced valuations to attractive levels. Investors are attempting to price in the moderation of global economic growth, continued trade tensions and more restrictive monetary policy.
FIXED INCOME: Slower global concerns combined with equity price volatility contributed to a flight to safety trade within fixed income markets. US bonds as measured by the Barclays US Aggregate Bond Index advanced 1.84% in December and finished the year essentially flat. Treasury bonds were the primary beneficiary of the risk-off trade as US government yields across the maturity spectrum fell. Investment grade corporate bonds lagged as spreads reached their widest levels since February 2016. Although credit fundamentals largely appear healthy, investor are now demanding higher premiums for exposure to similar credit risk as lower risk appetite translates to wider spreads.
ECONOMY: U.S. economic data has softened in the recent months and growth is expected to moderate in 2019. The Federal Open Market Committee left short term interest rates unchanged at their November meeting, while striking a dovish tone by stating interest rates are “just below” neutral. The impact of higher interest rates and increased borrowing cost has already impacted several industries, including auto and real estate. However, the largest headwind to growth remains global trade conflict at a time where the US trade deficit reached a 10-year high.
EQUITY: November provided reprieve for global stocks as equity markets bounced back after a tough October. The MSCI Emerging Markets Index led the way with returns of 4.12% as China equity markets rebounded from the lows. US equities also had positive returns with the S&P 1500 Index returning 2.06%. Corporate earnings in the US remained robust as third quarter S&P 500 aggregate earnings increased over 25%, the highest growth rate since 2010. Volatility levels remained elevated and closer to long-term averages as investors adjust to changing market dynamics, constant news flow and position portfolios for 2019.
FIXED INCOME: US bonds as measured by the Barclays US Aggregate Bond Index advanced .06% in November. The shift in Fed speak sparked a rally in government bonds and the 10-Year US Treasury rate declined from 3.24% to 3.01% during the month. In addition, the Treasury yield curve showed its first signs of inversion as the 2-year and 3-year yields moved higher than the 5-year yield. While a December rate hike remains probable, market participants have lowered expectations of subsequent hikes. Credit spreads remained under pressure as a sizable drop in oil prices weighed on the energy sector.
ECONOMY: U.S. economic data was robust in May signaling above-trend GDP growth for the second quarter. The ISM Manufacturing Index rose to 58.7 with broad-based expansion at the industry level. Inventory levels have not been able to keep up with new orders resulting in a healthy backlog of orders, which should provide a tailwind to growth in subsequent periods. Employment data surpassed expectations as labor market conditions continued to tighten. Nonfarm payrolls increased by 223,000, wage growth improved, and the unemployment rate declined to 3.8%. Outside the U.S., global manufacturing PMI data declined to a 9-month low, but remained indicative of further expansion. Political developments in Italy and Spain prompted renewed concerns about the stability of the Eurozone.
EQUITY: Equities experienced significant performance divergences as a rallying U.S. dollar weighed heavily on international markets. U.S. stocks were positive across all market capitalizations with the S&P 1500 Index returning 2.41% in May. Corporate earning for S&P 500 companies benefited significantly from tax reform with earnings increasing at the fastest pace in 7 years. Smaller cap domestic stocks continued to exhibit market leadership, benefiting from a higher percentage of domestic revenues that are insulated from restrictive trade policies. The stronger U.S. dollar along with political turmoil in Europe contributed to negative returns for international stocks with the MSCI All Country World Index (Excluding the U.S.) returning -2.31%.
FIXED INCOME: Investment grade bonds posted positive returns in May as investors moved to safe-haven assets. The yield on the 10-year Treasury note climbed to 3.12% intermonth before retracing sharply. Treasury yields closed May lower across the curve, boosting fixed income markets. Spreads for higher yielding debt widened as political uncertainty in Europe prompted risk-off sentiment. Despite higher volatility, the Federal Open Market Committee (FOMC) is expected to raise short-term interest rates again in June.
Equity markets declined rapidly over the last several trading days as volatility returned after an unusually long period of stable markets. In conjunction, fixed markets have been adversely impacted by rising yields stemming from higher inflation expectations.
Although these rather dramatic price movements create sensational headlines and carryover reactions in the markets around the world, it is important to consider the reasons behind the volatility.
There has been no fundamental change to the current strength of the global economy. Economic data over the past week has been favorable with employment, pending home sales, and ISM manufacturing data exceeding consensus analyst expectations. Strengthening domestic economic data has contributed to higher inflation expectations and concerns over faster tightening by the Federal Reserve. While predicting the exact path for equity prices is a foolish undertaking and subject to change with sentiment, the long-term outlook for the global economy remains constructive.
Our Investment Strategy Team has not changed its outlook and recommends remaining fully invested. We believe market volatility, which hit all-time lows in 2017, can be expected to return to more normal levels going forward. Diversified investment portfolios can help to mitigate volatility over economic cycles.
Fixed Income Highlights
Ocean State Charities Trust announced today the organization has awarded over $10 million dollars to cities and towns throughout Rhode Island since its inception. Grants have ranged from $450 to $30,000 with the majority of the awards in the range of several thousand dollars.