Growth & Optimism: A Strong Start to 2019

The U.S. stock market experienced a beginning to 2019 that has all but erased memories of an adverse 2018 stock market and sparked crucial conversations as to the future of the economy. For most investors, there is a reason to celebrate, as the major stock indexes have seen the best four-month start to a year since 1999 while wiping away losses from the fourth quarter. Halfway through earnings season, over three-quarters of reporting S&P 500 companies have beat earnings expectations and investor confidence continues to rise as significant players hit milestone market values. Recent economic trends have driven market optimism, and are essential to identify as mainstays to current growth. As 2019 carries onward, these following economic movements will be foundational if this bull market is to continue.

Economic Growth

• GDP grew by 3.2%, which is the best first quarter for the American economy since 2015. Although the growth has neutralized fears of an economic slowdown, the underlying data indicates that there are still reasons to be cautious. Declining consumer spending (for the third quarter in a row) and climbing inventories have given cause for attentiveness to the components of recent growth.

Employment Data

• On May 3^rd, employment data was released that showed 263,000 new jobs created in the month of April, which resulted in an unemployment rate of 3.6%, the lowest rate since 1969. All employment data surpassed economic forecasts by a healthy margin and indicated that the economy is officially rebounding from its rough end to 2018 and a slow start in 2019. Notably, inflation indicators remain subdued, giving much hope that this growth can continue without raising concerns at the Federal Reserve.

Interest Rates

• On May 1^st, the Federal Reserve announced that its benchmark interest rate would remain unchanged in light of steady economic growth and declining fears of rampant inflation. Earlier in the week, inflation numbers showed a drop to 1.6%, but the Fed implied in their statements that they believe this trend to temporary, as they expect core inflation to rise again. However, as long as inflation stays quiet, it seems that the Fed will continue their dovish approach to changing interest rates.

As 2019 continues, there’s plenty of reasons to be optimistic about continued growth in the market, and there has been a relative lack of red flags that could signal an impending downturn. It’s important to note that recent economic data should not be taken at face value and that underlying components should always be evaluated with scrutiny. However, with a measured approach to the recent growth data, there is still reason to believe that these trends can continue. Even with the market at all-time highs, Narwhal continues the search for buying opportunities. Our bottom-up analysis style helps to identify value in individual companies regardless of general market trends. While we maintain that this style is not necessarily predictive, it allows for a degree of flexibility that we find exciting, independent of the current market conditions.