Report Cards
With over a month of school behind us, grades are starting to come in for Yakel kids—for the most part, it’s all good news. Everyone’s doing ok for first quarter—except Melanie…she’s working on pulling up her C in PE!! Apparently, the new PE teacher at school is a little more strict this year…no automatic “A” participation grades! You’ve got to be able to run a mile in under 11 minutes…Melanie’s working on it… 😊
In the stock market, third quarter “grades” are rolling in as well. And so far, it’s been quite a year!! Since January 1, 2019, the S&P 500 has risen over 20%:
Source: R.W. Baird
And most other asset classes have equally excelled this year:
Source: R.W. Baird
With most major asset classes posting double digit gains for the year, we are pleased, but are starting to wonder if investors are grading on a curve…
Global economic news from this quarter shows slowing economic growth around the world, and large risks such as trade, geopolitical events, central bank policy, and increasing regulation loom large. While these risks may not materialize, and the global markets may continue their great run, at Meridian, we have our eyes on a few key metrics like the employment numbers. While it is commonly thought that layoffs are caused by recessions, recessions are actually preceded first by a slowdown in job openings as businesses begin to pause, anticipating a slowdown. If businesses begin to see revenue streams slowing and margins shrinking, they move from not hiring to beginning the first rounds of layoffs. So, as this chart from JP Morgan shows, recessions have typically been preceded by hiring freezes and layoffs:
We have not yet seen the job openings numbers worsen, but it is one of the data points we are watching closely.
For now, we are cautiously pleased with the year to date market performance in light of the underlying slowing, so enjoy opening your 3rd quarter 2019 statements from your 401K and other investment accounts! 😊