Stock markets continued their late February climb returning 6.5-7% for March. Over the past year large company stock returns are barely positive and the NASDAQ still down -2.75%. The Health Care sector of the stock market is still reeling from losses that began last summer. Those stock prices had become inflated from the optimism of investors. Health care and biotech indices are down -6 to – 25% from a year ago. All markets cycle and health care stocks may be taking a breather for now. Our clients’ generally large exposure to this sector served them well over the past few years but has hindered returns lately.
The Federal Reserve expressed reluctance to move forward with interest rate increases when they met last week. Markets responded with relief to the recognition this showed of the lowering interest rates in the rest of the world that I discussed last month. The Feds are now projecting two instead of four rate hikes that they had planned for this year. One effect of this position is to further reduce the USD against foreign currencies and allow commodity prices (like gold, oil, metals) to continue to rally. This will be good for U.S. stock prices in general. Two possible events on the horizon that could cause market drops are Brexit (Great Britain exiting Euro Group) or a crisis in the Chinese Yuan currency. Neither may develop. The impact of either scenario on us would be small relative to the impact on the directly affected countries.
A last hoorah from old man winter – some temperance for a very early spring has been visited on us. The cycles are familiar – it’s the days that hold surprises. What brilliance from a strong April sun on snow. No harm was done and the moment is all so fleeting. Tomorrow’s surprises await, ready or not.