A May Overview
The markets have remained in a roller coaster trading range for most of the past three to four months. Most asset categories bounced around during the last five months, finishing in slightly negative territory for the year. In reality, we are almost back to where we started 2018.
The silver lining in all this is, even as prices dropped during the last quarter, the fundamentals of our economy have continued to improve. As of late March, the estimated earnings growth rate for the S&P 500 was a whopping 17.3 percent. This would be the highest earnings growth rate we have seen since 2011. Given the benefits of lower corporate tax rates on company earnings, the increase is not surprising, but the magnitude of it is. Additionally, the internals of the market have continued to hold strong as we have traded sideways for the last four months, which is typically a positive indicator for future movement.
We continue to believe this market correction will eventually give way to higher prices. We are going to continue to be at the whim of global geopolitical headlines. But, as long as the global economies continue to improve, the value of the markets should drive prices higher.