A Market Review
The US women’s national soccer team recently won their second consecutive World Cup championship, and NFL preseason camps are winding down, two sure signs that we are in the final stages of summer. While most of us generally think of summer fondly – a time of year filled with barbecues, afternoons relaxing by the pool, and family vacations – historically, summer has tended not to be a great time for the US equity market, a phenomenon which has led to the well-known market adage “Sell in May and go away.”
Thus far, however, 2019 appears to be bucking the trend. While the second quarter wasn’t exactly smooth sailing, the US equity market wrapped up the quarter with a bang as the S&P 500 had its second best June in the modern era (since 1950) gaining more than 7% during the month, giving the Index a total return of more than 18% through the first half of the year. The second quarter was also kind to fixed income investors, as falling interest rates provided a tailwind for bonds, helping the Bloomberg Barclays US Aggregate Bond Index gain more than 3%. In fact, despite the current geopolitical uncertainty – US/China trade tensions, Brexit, etc. – most segments of the US equity, international equity, and fixed income markets are in positive territory for the year.
With the S&P 500 having gained more than 18% during the first half of the year and each of the major US equity indices recently hitting new all-time highs, many investors may be wondering if US stocks have anything left in the tank. If history is any guide, there is no reason to assume that the market is running out of steam. Since its inception, there have been 31 occasions when the S&P 500 gained 10% or more through the first half of the year. In 23 out of those 31 years, the second half of the year produced positive returns and across all 31 years the index has produced an average gain of more than 6% during the final six months of the year. Obviously, we cannot know how the second half of this year will turn out, however, it is encouraging to know that in years past the market has indeed had the steam to continue on an upward trajectory after notching a double-digit gain in the first half of the year.
Like the US women’s national soccer team, US Equities continue to reign supreme heading into the third quarter, as it is the top-ranked asset class from a relative strength perspective. From a style perspective, we continue to see growth showing strength over value across all three size boxes. Meanwhile, technology continues to lead the race amongst the domestic equity sectors.
As always, we continue to closely monitor your portfolio and stand ready to take appropriate action should the current market landscape shift. If you would like to become more familiar with my investment process and the tools I use to identify market leadership across and within asset classes, please don’t hesitate to contact to me.
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Past performance is not indicative of future results and there is no assurance that any forecasts mentioned in this report will be attained.
Stocks offer growth potential but are subject to market fluctuations. Dividends are not guaranteed; companies can reduce or eliminate their dividend at any time. There are special risks associated with an investment in real estate, including credit risk, interest rate fluctuations and the impact of varied economic conditions.
Technical analysis is just one form of analysis. You may also want to consider quantitative and fundamental analysis before making any investment decisions. Please be aware that the content of this newsletter is based on the opinions of Dorsey Wright research and may differ from the research provided by Wells Fargo Advisors. Indexes and benchmarks used in this article are unmanaged and cannot be invested in directly. This market theme letter was written by Dorsey Wright & Associates and is provided courtesy of Wells Fargo Advisors.
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