Global markets extended the first quarter rally in April. U.S. large caps led the way with the tech-heavy Nasdaq 100 up 5.5%, the S&P 500 Index adding 4.1%, and the Dow Jones Industrials up 2.6%. The small-cap Russell 2000 was up 3.4%.
Foreign stocks also enjoyed healthy gains with the developed market EAFE Index up 2.9% and emerging markets up 2.4%.
Confidence was bolstered by better than anticipated economic growth from the U.S. and China as well as dwindling trade risks. While first quarter GDP topped expectations, there were signs of slower momentum beneath the surface. Yet earnings growth from about half the companies in the S&P 500 that have reported so far delivered stronger than expected results.
The Fed continues to be accommodating with some speculation that they’ll cut interest rates before year-end, even during this healthy expansion. Fears over low inflation have been mounting, with Chairman Powell recently calling it “one of the major challenges of our time.’’ As a result, riskier areas of the market like growth and technology flourished in April while defensive sectors like REITs, utilities, and precious metals receded.
What to do now?
Suffice it to say, the old axiom to sell in May and go away might not work this year if the stock market continues to price in a possible Fed Funds interest rate cut and a steeper yield curve.
With some optimism already priced in, it remains critical to stay flexible and be ready to adapt to as markets change.
Our 50 years of wealth management have confirmed that risk management is essential to long-term success. Maximizing returns can be an elusive goal and detrimental to your long-term financial success. It’s more important to make sure that you’ve set realistic expectations and come up with a plan that can help you withstand even bear market conditions. As investment advisors, one of our biggest responsibilities is to help our clients prepare and adapt to changes in the markets as well as changes in their lives.
Interested in working with an advisor? Click here to get started.