After a horrible end to 2018, we had a strong first quarter to start in 2019. No guarantees, of course, but an interesting fact is that 9 out of the past 10 times that the S&P 500 was up at least 10% for the first quarter, the year turned out to be positive. Again, no guarantees but we like the historical significance of that. Clients are asking questions about what drove the market performance in the first quarter of this year. The answer is that a lot was due to oil prices bouncing back, fourth quarter corporate earnings came in a lot better than expected, China took steps to stimulate their economy and the Fed paused. We want to see if these things continue into a strong second quarter.
What Will Happen?
In terms of first quarters, 2019 was the best the S&P 500 index has been in 21 years. Before we get too excited about this, let’s remember that although the first quarter S&P 500 returns were great, we still haven’t reached the highs of last year. We had a big drag at the end of 2018 and had the worst December for markets since the Great Depression. On the other hand, in February we had better retail sales than expected, which shows a strong consumer. With all these facts being stated, the question becomes, is this just a rebound or does it possibly indicate a rally?
Beyond the Headlines
We’ve tried to investigate to see if there is something that may cause this rally to become just a rebound. Geopolitical risks are a thing but aren’t really being talked about as a potential impact. On this vlog, we’ve talked for the last few years about the crisis in Venezuela, but it really hasn’t had any kind of impact, so why is it on the radar now? Russia landed troops in Venezuela last week for the first time. It’s the first time that Russia has put real boots on the ground since the Cuban Missile Crisis. We’re not saying we’re the middle of a Cuban Missile Crisis, but that shows that there is direct fighting between two large powers. Russia is supporting one leader and the U.S. is supporting another. This is kind of the first time we’ve seen this type of global disagreement on this crisis. It’s right south of our border and may be something that will start gaining headlines in a few weeks. If this starts to escalate that could push down some of the euphoria on the global growth rebound.
The Future of Drones
We talk a lot about business models being disrupted. We saw one example of this last Tuesday. For the very first time in the United States, there was an FAA sanction commercial drone flight used for revenue-producing purposes. We’ve seen several drone business models outside of the United States, but this was the first to be documented in the U.S. There was a flight from one hospital building in Raleigh, NC to another area carrying blood samples for pay. We think this market is going to be very interesting to watch develop. It makes you wonder if it’s going to be like a Wright Brothers moment in the future. The conversation might be, “When was the first time a drone was used to make money?”, and the answer to that will be Raleigh, NC in March 2019.
The federal government on Friday, very discretely, permitted the Keystone Pipeline from any other federal environmental influence. There’s one small state supreme court test in Nebraska and that’s about it. So that pipeline is going to be huge for energy in the United States. The pipeline runs from Alberta down into Nebraska and could start construction as late as this year or early next year and could be used not only for energy but for jobs, infrastructure, amongst many other areas.
Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Economic forecasts set forth in this presentation may not develop as predicted.
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