The U.S. stock market completed the best first-half performance since 1997. All major indices, whether foreign or domestic, ended June in double digits year-to-date. All stock funds, both foreign and domestic, used in our client portfolios ended the first half of the year with double digit returns; all the bond funds used for our clients, both nominal and municipal, made gains in June and are positive in 2019.
USA vs. Huawei
Beginning in 2018, U.S. trade policy has dominated global economics and investment performance. This past weekend at the G20 Summit in Japan, President Xi of China and President Trump called a trade war cease- fire that buoyed the U.S. stock market to new all-time highs on Monday, July 1. Trump threw a lifeline to Huawei, one of China’s largest tech companies, by allowing U.S. companies to resume selling high-tech equipment to the Chinese tech giant. Not included would be goods related to national security. Trump agreed to put on hold new 25% tariffs on an additional $300 billion of Chinese goods, and Xi agreed to buy more U.S. agricultural products.
Other Positive Developments in 2019
30-year fixed mortgage rates have fallen well below 4% across America. Fidelity Bank Trust in Iowa just quoted a 30-year fixed rate at 3.5%. This helps home buyers and home sellers and helps the U.S. economy continue to grow. In June, the Fed committed to help continue the U.S. economic expansion and suggested that it may cut interest rates at the July meeting after nine interest rate hikes in a row.
The Wake-Up Calls are Coming Faster and Faster
The lead editorial in the June 8 Wall Street Journal concludes: “The uncertainty caused by scattershot tariffs is now hurting employment as well as investment.” The U.S. economy added only 75,000 jobs in May. Macroeconomic Advisors, an independent research firm, estimates that Q2 Gross Domestic Product (GDP) growth will be 1.4%, down from 3.1% in Q1. Job growth averaged 164,000 per month for March, April, and May this year compared to 223,000 per month in 2018, and an average of 217,000 per month for the four years of Obama’s 2nd term. Job creation is slowing to its lowest pace since 2010. All of this leads to the aspiration that new trade negotiations will produce some non-protectionist certainty on trade, which will help the U.S. and global economies to continue growing.