STOCKS ENJOY ROBUST FIRST HALF GROWTH: The S&P 500 just registered its best first half of a year in 22 years. Although U.S. stocks were slightly down this week, they ended the first half of the year solidly recovering from the very poor fourth quarter of 2018. This bounce was largely influenced by the U.S. Federal Reserve Bank’s stated reversal on its intentions to raise rates, and signals that it could even lower rates. This stock market run has occurred despite the escalation of the U.S./China trade fight and mounting fears of an economic slowdown. Apparently, investors believe the economy has slowed down just enough to influence the Fed to halt rate increases (and perhaps lower them), but not enough to actually hurt stock values. That “just right” scenario will be tested in the second half of the year. The sustainability of this rally will be highly influenced by the outcome of the latest round of trade talks between the U.S. and China.
A LONG ROAD BACK TO RECOVERY: The housing crisis in the U.S. was beyond severe, but a recent data point suggests we are very close to being fully recovered. Serious mortgage delinquencies are defined as loans that are three monthly payments or more past due. The serious delinquency rate in May dropped to 0.70% in May from 0.72% in April and 1.03% in May of 2018. In February of 2010, this rate was 5.59%. The current rate is the lowest since July 2007.
U.S. ECONOMY HAD SOLID FIRST QUARTER GROWTH: According to the U.S. Commerce Department, the U.S. economy grew by 3.1% in the first quarter of 2019. That is a strong number especially in light of recent trends where the first quarter of the year has been generally slow. The growth rate during the fourth quarter of 2018 was 2.2%. The Commerce Department had previously estimated 3.1% growth, and this report affirmed that preliminary finding. A variety of economists are already predicting that the second quarter will come in just under a 2% growth rate. Slowing global growth and trade tensions are the culprits for these muted predictions. A cautionary statistic in the first quarter number was consumer spending which grew at only a 0.9% annual rate compared to a 2.5% rate in the fourth quarter of 2018.