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Markets hold on to early highs through Q2 2019

In a bull market that has surpassed 10-year expectations, stocks ended Q2 2019 in the best shape since 1997. This performance is despite expected Fed rate cut and continuing trade animosity between the U.S. and China.

The S&P 500 climbed to new highs of 17% in the first half of 2019. The Dow Jones Industrial Average trailed at 14% over the same time period. More than 60% of the companies in the Dow industrials and S&P 500 rose, with technology firms seeing some of the biggest gains, according to Corrie Driebusch for the WSJ. Microsoft Corp. was the best performer in the Dow, up 32%.

CNBC’s Jim Cramer listed the top five Dow stock performers of 2019 so far:

  1. Microsoft up nearly 32%
  2. Visa rallied nearly 31%
  3. American Express rose by about 29%
  4. Disney climbed nearly 27%
  5. Cisco saw a 26% increase

Over on the S&P 500, Cramer lists:

  1. Chipotle growing 68%
  2. Advanced Micro Devices up 64%
  3. Cadence Design rose 62%
  4. MSCI soared nearly 62%
  5. Hess climbed 57%

Searching for clues

Investors are looking for clues about what’s to come in future months. June ended with Presidents Xi and Trump calling a truce over trade but there is no long-term trade agreement in place, leaving the trade fight on unsteady ground and corporate confidence lower. Weakening earnings forecasts could also feed greater volatility as could the possibility of a rate cut by the Fed in as early as July.

Through May, the fundamentals were still strong. The Department of Commerce reported that personal consumption expenditure (PCE) increased in May and PCE inflation declined to 1.5%. Personal disposable income grew 0.5% and personal spending up 0.4% in May.

Watch for headwinds

With a backdop of a strong current U.S. economy, there are potential risks on the horizon that we are keeping an eye on. The continuing U.S.-China trade dispute and the unresolved Brexit issue over in Europe will continue to produce uncertainty on the international front. Domestically, yields on U.S. Treasury Bonds have been close to signaling a impending recession, so all eyes are on the Federal Reserve to see whether or not they will respond by lowering interest rates. Contact us if you have any questions.

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