Monetary policy shifts have pushed interest rates to extremely low levels, providing liquidity to markets and pushing all financial assets higher. The second quarter ended with the S&P 500 Index just a percentage point below June’s record highs, and about 2% below our long-held target of 3,000, as growth stocks continued to outpace value. High dividend paying stocks did well in response to lower interest rates, but growth is still winning. International equity markets saw smaller gains. Bonds have generated significant positive returns this year, particularly among longer maturities, offsetting the impact of the rise in rates in 2018. Credit spreads tightened across the credit spectrum, generating strong returns particularly in the deeper credit and the high yield sectors.
Headline risks and uncertainty primarily relating to international growth and trade tensions have kept investors, and the Fed nervous despite continued solid domestic economic growth. Going forward, it will be up to earnings reports to support current equity market levels. Should the economy maintain current strength, interest rates should move back to a higher range, closer to equilibrium with the economy.
Please review our quarterly review for more detailed information on the economic and market environment. As always, we welcome your questions and comments. Please don’t hesitate to reach out to your advisor, should you want to discuss our outlook in greater detail.