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What’s the good news in the stock market?

I am happy to join Money Monday this morning with good news, and that is not an April Fool’s joke. On Friday, the US markets closed out a great quarter. The S&P 500 rose 0.7% to 2834.4, closing out the quarter up 13% for the quarter, its best showing since 2009. The Dow Jones Industrial Average on Friday hit 25928.68, finishing up 11% over the last three months. And the Nasdaq Composite added 16% since January 1, topping 7729. And the Russell 2000 – an index of smaller market cap companies – has its best start of the year since 1991. Overall, investors have a lot to smile about so far this year.

What is behind this investor optimism?

There are a few factors that contributed to the first quarter rally. First, stocks were down sharply at the end of 2019, and many believe the selloff might have sharper than the economic news warranted. Second, investors are reacting positively to the Fed decision, along with other central banks, to pause additional interest rate hikes as the economy has shifted down a gear. The markets are also rallying around the fact that the US economy remains a bright spot in the global economy. Brexit is shaking the UK and Germany’s economy – the biggest in the European Union – has slowed dramatically. China’s growth has cooled as well. So, while the economy here at home isn’t breaking records, it is steady, and that has helped to boost investor confidence.

Is it just select sectors that are giving the markets a boost?

No. Over the past three months, we have seen good news out of all sectors. In fact, all 11 sectors of the S&P 500 sectors kicked off the first quarter higher. That is something we have not seen in 5 years. Now, this is not to say some didn’t do better than others. The tech sector and energy companies started 2019 particularly strong. But we did see gains across the board in Q1.

Are there any clouds on the horizon? Can the bull market continue?

There are some concerns that are weighing on investors’ minds. First, how much has the US economy downshifted? We have seen consumer confidence soften, and with it, consumer spending, which is up slightly after being down at the end of 2018. The Bureau of Economic Analysis also revised GDP growth down to 2.2% from the initial estimate of 2.6% in the final three months of 2018. Many also believe the stimulus effects of the corporate and individual tax cuts are wearing off. Finally, some are concerned about the recent divergence between the stock and bond market yields. They typically rise together when investors are confident.

That said, there is no way of knowing what is around the corner! Perhaps Brexit comes to a quick resolution, or that the US and China reach an agreement to end the trade war. We could see investors continue their optimist streak. And the end of the day, trees don’t grow to the sky, and there will be a correction. We just don’t know when that will be. You simply cannot predict the future.

As we celebrate a strong quarter, what should we keep in mind for our portfolio?

As you know, at Ariel we believe slow and steady wins the race. The best thing you can do is to consistently save and contribute to your retirement and take a long-term view. Do not try to time the market. And remember, never be afraid to ask questions. If the ups and downs of the past few months make you nervous, I would encourage you to speak with your financial advisor or the company that manages your retirement account. You can never have enough information, Tom, and the beginning of the year is as good a time as any to review your retirement account and ensure remain on track.