OVERVIEW
Global equity markets rebounded sharply in the first quarter of 2019 as the MSCI All Country World Index (ACWI) returned +12.2%. Investors were happy to welcome the New Year after the ACWI index declined by -8.9% in 2018 – the worst annual return since 2008. Investors grappled with a few conflicting market forces, including:
Positive: cheap valuations after the 2018 selloff, progress toward a US/China trade deal, and more stimulus from global central banks.
Negative: decelerating global economic growth.
What a difference a few months makes. The strong start to 2019 is not because all the risks facing the market in late-2018 have quickly evaporated. Rather, we believe that last year’s selloff was another example of how markets can be extremely volatile and sometimes irrational in the short-term. The randomness of markets over short time periods is why we do not engage in market timing and encourage our clients to maintain a long-term viewpoint. We believe the best approach is to combine a detailed financial plan with a structured, consistent, and repeatable investment process. At Winthrop Wealth Management, out investment process is designed to provide well-diversified portfolios constructed with a methodology based on prudent risk management, asset allocation, and security selection.
Our goal with this update is to provide a recap of the global markets, answer questions that have been top-of-mind for many of our clients, and provide context for our market outlook.
DISCLOSURES
Securities and Retirement Plan Consulting Program advisory services offered through LPL Financial, a
Registered Investment Advisor, Member FINRA/SIPC. Other advisory services offered through Winthrop
Wealth Management, a separate entity from LPL Financial.
The economic forecasts set forth in this material may not develop as predicted and there can be no
guarantee that strategies promoted will be successful.
Content in this material is for general information only and not intended to provide specific advice or
recommendations for any individual.
The prices of small cap stocks and mid cap stocks are generally more volatile than large cap stocks.
Because of their narrow focus, sector investing will be subject to greater volatility than investing more
broadly across many sectors and companies.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as
interest rates rise and bonds are subject to availability and change in price.
International investing involves special risks such as currency fluctuation and political instability and may
not be suitable for all investors. These risks are often heightened for investments in emerging markets.
Price to forward earnings is a measure of the price-to-earnings ratio (P/E) using forecasted earnings
All indexes mentioned are unmanaged indexes which cannot be invested into directly. Unmanaged
index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the
performance of any investment. Past performance is no guarantee of future results.
The MSCI ACWI (All Country World Index) is a free float-adjusted market capitalization weighted index
that
is designed to measure the equity market performance of developed and emerging markets.
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure
performance of the broad domestic economy through changes in the aggregate market value of 500
stocks representing all major industries.
The S&P Midcap 400 Stock Index is an unmanaged index generally representative of the market for the
stocks of mid-sized US companies.
The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies
in the Russell 3000 index, which represents approximately 10% of the total market capitalization of the
Russell 3000 Index.
16.
DISCLOSURES
Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower priceto-book ratios and lower forecasted growth values.
The Bloomberg Barclays U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate
bond market, including both government and corporate bonds.
The Barclays Capital Municipal Bond Index is a broad market performance benchmark for the tax-ex- empt bond market, the bonds included in this index must have a minimum credit rating of at least Baa.
The Barclays US High Yield Index covers the universe of fixed rate, non-investment grade debt. Euro- bonds
and debt issues from countries designated as emerging markets (sovereign rating of Baa1/BBB+/BBB+
and
below using the middle of Moody’s, S&P, and Fitch) are excluded, but Canadian and global bonds (SEC
registered) of issuers in non-EMG countries are included.
The MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the
equity market performance of developed markets, excluding the US & Canada.
The MSCI Europe Index captures large and mid cap representation across 15 Developed Markets (DM)
countries in Europe*. With 445 constituents, the index covers approximately 85% of the free float-ad- justed market capitalization across the European Developed Markets equity universe.
The MSCI Japan Index is designed to measure the performance of the large and mid cap segments of
the Japanese market. With 322 constituents, the index covers approximately 85% of the free float-ad- justed market capitalization in Japan.
The MSCI EM (Emerging Markets) Index is a free float-adjusted market capitalization weighted index
that is designed to measure the equity market performance of the emerging market countries of the
Americas, Europe, the Middle East, Africa and Asia.
The MSCI China Index captures large and mid cap representation across China H shares, B shares, Red
chips, P chips and foreign listing. With 459 constituents, the index covers about 85% of this China equity
universe. Currently, the index also includes Large Cap
A shares represented at 5% of their free float adjusted market capitalization.
The MSCI India Index is designed to measure the performance of the large and mid cap segments of the
Indian market. With 78 constituents,
the index covers approximately 85% of the Indian equity universe.
The Nasdaq-100 Index includes 100 of the largest domestic and international non-financial companies
listed on The Nasdaq Stock Market based on market capitalization. The Index reflects companies across
major industry groups including computer hardware and software, telecommunications, retail/whole- sale trade and biotechnology. It does not contain securities of financial companies including investment
companies.
< COMMENTARY
Market Commentary | April 11, 2019
Q1 2019 Market Review and Outlook
By Andrew Murphy, CFA
Co-Chief Investment Officer
OVERVIEW
Global equity markets rebounded sharply in the first quarter of 2019 as the MSCI All Country World Index (ACWI) returned +12.2%. Investors were happy to welcome the New Year after the ACWI index declined by -8.9% in 2018 – the worst annual return since 2008. Investors grappled with a few conflicting market forces, including:
Positive: cheap valuations after the 2018 selloff, progress toward a US/China trade deal, and more stimulus from global central banks.
Negative: decelerating global economic growth.
What a difference a few months makes. The strong start to 2019 is not because all the risks facing the market in late-2018 have quickly evaporated. Rather, we believe that last year’s selloff was another example of how markets can be extremely volatile and sometimes irrational in the short-term. The randomness of markets over short time periods is why we do not engage in market timing and encourage our clients to maintain a long-term viewpoint. We believe the best approach is to combine a detailed financial plan with a structured, consistent, and repeatable investment process. At Winthrop Wealth Management, out investment process is designed to provide well-diversified portfolios constructed with a methodology based on prudent risk management, asset allocation, and security selection.
Our goal with this update is to provide a recap of the global markets, answer questions that have been top-of-mind for many of our clients, and provide context for our market outlook.
DISCLOSURES
Securities and Retirement Plan Consulting Program advisory services offered through LPL Financial, a
Registered Investment Advisor, Member FINRA/SIPC. Other advisory services offered through Winthrop
Wealth Management, a separate entity from LPL Financial.
The economic forecasts set forth in this material may not develop as predicted and there can be no
guarantee that strategies promoted will be successful.
Content in this material is for general information only and not intended to provide specific advice or
recommendations for any individual.
The prices of small cap stocks and mid cap stocks are generally more volatile than large cap stocks.
Because of their narrow focus, sector investing will be subject to greater volatility than investing more
broadly across many sectors and companies.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as
interest rates rise and bonds are subject to availability and change in price.
International investing involves special risks such as currency fluctuation and political instability and may
not be suitable for all investors. These risks are often heightened for investments in emerging markets.
Price to forward earnings is a measure of the price-to-earnings ratio (P/E) using forecasted earnings
All indexes mentioned are unmanaged indexes which cannot be invested into directly. Unmanaged
index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the
performance of any investment. Past performance is no guarantee of future results.
The MSCI ACWI (All Country World Index) is a free float-adjusted market capitalization weighted index
that
is designed to measure the equity market performance of developed and emerging markets.
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure
performance of the broad domestic economy through changes in the aggregate market value of 500
stocks representing all major industries.
The S&P Midcap 400 Stock Index is an unmanaged index generally representative of the market for the
stocks of mid-sized US companies.
The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies
in the Russell 3000 index, which represents approximately 10% of the total market capitalization of the
Russell 3000 Index.
16.
DISCLOSURES
Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower priceto-book ratios and lower forecasted growth values.
The Bloomberg Barclays U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate
bond market, including both government and corporate bonds.
The Barclays Capital Municipal Bond Index is a broad market performance benchmark for the tax-ex- empt bond market, the bonds included in this index must have a minimum credit rating of at least Baa.
The Barclays US High Yield Index covers the universe of fixed rate, non-investment grade debt. Euro- bonds
and debt issues from countries designated as emerging markets (sovereign rating of Baa1/BBB+/BBB+
and
below using the middle of Moody’s, S&P, and Fitch) are excluded, but Canadian and global bonds (SEC
registered) of issuers in non-EMG countries are included.
The MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the
equity market performance of developed markets, excluding the US & Canada.
The MSCI Europe Index captures large and mid cap representation across 15 Developed Markets (DM)
countries in Europe*. With 445 constituents, the index covers approximately 85% of the free float-ad- justed market capitalization across the European Developed Markets equity universe.
The MSCI Japan Index is designed to measure the performance of the large and mid cap segments of
the Japanese market. With 322 constituents, the index covers approximately 85% of the free float-ad- justed market capitalization in Japan.
The MSCI EM (Emerging Markets) Index is a free float-adjusted market capitalization weighted index
that is designed to measure the equity market performance of the emerging market countries of the
Americas, Europe, the Middle East, Africa and Asia.
The MSCI China Index captures large and mid cap representation across China H shares, B shares, Red
chips, P chips and foreign listing. With 459 constituents, the index covers about 85% of this China equity
universe. Currently, the index also includes Large Cap
A shares represented at 5% of their free float adjusted market capitalization.
The MSCI India Index is designed to measure the performance of the large and mid cap segments of the
Indian market. With 78 constituents,
the index covers approximately 85% of the Indian equity universe.
The Nasdaq-100 Index includes 100 of the largest domestic and international non-financial companies
listed on The Nasdaq Stock Market based on market capitalization. The Index reflects companies across
major industry groups including computer hardware and software, telecommunications, retail/whole- sale trade and biotechnology. It does not contain securities of financial companies including investment
companies.