In the market update for second quarter of 2019 Bob Klosterman delves into current conditions. Following a worrisome fourth quarter in 2018, the first quarter of 2019 shrugged off most concerns of “ the second shoe” falling on the economy and investment markets. Last quarter we indicated that we saw some indicators to watch, including the potential of an inverted yield curve and rising housing inventory.

The yield curve has inverted with the 2-year rates higher than the 10-year treasury. We continue to see this as a yellow flashing signal rather than a red one for the time being. Simply because not all inverted yield curves lead to a recession. We will continue to watch this indicator carefully. The Federal Reserve apparent reversing course on their tightening and indicating that they DO NOT see a rate rise soon provides some comfort.

The housing inventory continues to be worrisome, especially since housing was the focal point of the last downturn. In the video, we suggest that the banks are NOT in the same position as last time. Also, rising interest rates increase the cost of a mortgage payment. Recent mortgage interest rate decreases should provide some boost.

Many other factors provide positive signals. Yet, the growth is likely to be more muted than the last couple of years. Many economists indicate that growth is likely to be under 2% on an inflation-adjusted basis. Earnings growth is also slowing. More in the video.

 

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