Denali Wealth Management

2019 Q3 Market Commentary

General Market Commentary as of September 30, 2019

The third quarter saw, for the first time in over a decade, the Federal Reserve cutting interest rates (not once but twice). Data suggests that later this month we are likely to see a third rate cut in as many meetings. With concerns over global economic weakening, trade tensions, and low inflation around the world, bond yields have continued to fall. Meanwhile, abroad, the European Central Bank (ECB) unveiled a stimulus package in hopes of reviving growth and inflation in the face of negative interest rates.

Despite the ongoing global trade fears and political rhetoric, the US equity market made modest strides in Q3. Some of the stronger returns were seen in the defensive equity and fixed income sectors, benefiting from lower interest rates. As we near the end of the year, year-to-date returns for all major asset categories remain in positive territory.

The current inverted yield curve could be interpreted as an ominous signal, yet the record low unemployment rate and the rise in payroll suggest otherwise. Regardless, predicting “if” a recession will occur, let alone “when”, would be a feat in and of itself. With all the noise circulating around this uncertainty it will likely only ramp-up over the next year. However, the market has shown to reward those who stay disciplined throughout the process.

Market Recap

Tot Return 3-MO* 12-MO* 3-Year* 5-Year* Closing Value
S&P 500 1.19% 2.15% 11.14% 8.58% 2,976.74
Dow Jones Industrial Average 1.19% 1.73% 13.71% 9.57% 26,916.83
NASDAQ Composite -0.09% -0.58% 14.62% 12.23% 7,999.34

Source: Morningstar. The S&P 500, Dow Jones Industrial Average, and NASDAQ Composite are unmanaged indexes. It is not possible to invest in an index. Past performance is no guarantee of future results. * Price only. Does not include dividends.

All overviews and commentary are intended to be general in nature and for current interest, educational purposes and factual reference only and are subject to change based on market and other conditions.

Denali Wealth Management

2019 Q2 Market Commentary

General Market Commentary as of June 30, 2019

The stock and bond markets are displaying a dichotomy of outcomes for the remaining months of 2019. Falling bond yields and an inverted yield curve appears to be signaling slower economic growth. On the other hand, strong equity gains in the US and many emerging markets suggest hopes for earnings acceleration later in the year.

Positive economic growth, low inflation, and accommodative monetary policies should support financial asset prices in the second half of 2019. For bond investors, slow but positive economic growth, limited inflationary pressures and friendly central banks should create a supportive environment for them as well for the balance of 2019.

That being said, for most investors, keeping a disciplined long-term perspective is the best policy to follow. This is no time to try and out smart the markets, but it is a good time to be diversified.

Market Recap

Tot Return 3-MO* 12-MO* 3-Year* 5-Year* Closing Value
S&P 500 3.79% 8.22% 11.91% 8.46% 2,941.76
Dow Jones Industrial Average 2.59% 9.59% 14.05% 9.59% 26,599.96
NASDAQ Composite 3.58% 6.60% 18.24% 12.68% 8,006.24

Source: Morningstar. The S&P 500, Dow Jones Industrial Average, and NASDAQ Composite are unmanaged indexes. It is not possible to invest in an index. Past performance is no guarantee of future results. * Price only. Does not include dividends.

All overviews and commentary are intended to be general in nature and for current interest, educational purposes and factual reference only and are subject to change based on market and other conditions.

Denali Wealth Management

2019 Q1 Market Commentary

General Market Commentary as of March 31, 2019

After a dismal fourth quarter, the first quarter of 2019 got off to a fast start for both bonds and stocks.

Coming off its worst quarterly performance since 2011, the S&P 500 rebounded 13.1% in Q1 for its best quarterly performance in ten years. The rebound is being largely attributed to an oversold bounce, improving expectations for a trade deal with China, and maybe most importantly a dovish leaning by global central banks.

Be that as it may, a caution flag was raised in March as the yield curve inversion extended further out on the curve to the 3mo – 10yr spread for the first time since 2007 with the 10-year Treasury yields hitting 15-month lows (2.34%).

Fed Fund Futures are now pricing a 64% probability for a rate cut by December as opposed to previous expectations for a rate rise.

Market Recap

Tot Return 3-MO* 12-MO* 3-Year* 5-Year* Closing Value
S&P 500 13.07% 7.33% 11.23% 8.65% 2,834.40
Dow Jones Industrial Average 11.15% 7.57% 13.60% 9.52% 25,928.68
NASDAQ Composite 16.49% 9.41% 16.65% 12.98% 7,729.32

Source: Morningstar. The S&P 500, Dow Jones Industrial Average, and NASDAQ Composite are unmanaged indexes. It is not possible to invest in an index. Past performance is no guarantee of future results. * Price only. Does not include dividends.

All overviews and commentary are intended to be general in nature and for current interest, educational purposes and factual reference only and are subject to change based on market and other conditions.

Denali Wealth Management

2018 Q4 Market Commentary

General Market Commentary as of December 31, 2018

Stock market Investors certainly are relieved that 2018 is over.

No wonder. It was a bruising year, the worst since 2008 during the financial crisis, as the S&P 500 fell 6.2% and a bear market seemed all but inevitable with the S&P 500 down more than 19% from a September high.

Clearly Fed policy is front and center to a lot of what is driving financial markets these days. There’s still a disconnect between what investors see (slowing economic growth) versus what policymakers see (economic growth is still pretty good).

Ten-year Treasury yields rose to their highest levels since 2011 as the Fed raised their target rate for the fourth time in December. In spite of those raises, bond yields still remain below their historical averages.

Meanwhile, one lingering issue has been overshadowed by the Fed lately: trade talks with China.

Market Recap

Tot Return 3-MO* 12-MO* 3-Year* 5-Year* Closing Value
S&P 500 -13.97% -6.24% 7.04% 6.28% 2,506.85
Dow Jones Industrial Average -11.83% -5.63% 10.21% 7.07% 23,327.46
NASDAQ Composite -17.54% -3.88% 9.84% 9.70% 6,635.28

Source: Morningstar. The S&P 500, Dow Jones Industrial Average, and NASDAQ Composite are unmanaged indexes. It is not possible to invest in an index. Past performance is no guarantee of future results. * Price only. Does not include dividends.

All overviews and commentary are intended to be general in nature and for current interest, educational purposes and factual reference only and are subject to change based on market and other conditions.

Denali Wealth Management

2018 Q3 Market Commentary

General Market Commentary as of September 30, 2018

Global economic growth continues at a steady pace. US GDP came in at a 4.2% annualized rate for the 2nd quarter (reported in the 3rd quarter). The economy is in its 9th year of economic expansion, the 3rd longest on record. The Federal Reserve, in September, raised the federal funds rate target by 25 basis points in light of this growth. Market expectations are for one additional increase in 2018 making it four for the year.

Global equities continued their recovery in the 3rd quarter while US equities advanced to record territory. After underperforming last quarter, large-cap stocks outperformed their small-cap counterparts for the 3rd quarter. Growth continued to outperform value across the capitalization spectrum for the 3rd quarter of 2018 on the heels of outperforming across all capitalization sizes by historical margins in 2017.

US interest rates continue to slowly rise while remaining at historical lows. Interest rates rose for short term US Treasury securities in the 3rd quarter in concert with the Fed’s interest rate hikes in June and September. The yield on the 10-year treasury also rose, but by a smaller amount than short-term yields, which reinforced the markets concerns over a flatten yield curve.

Market Recap

Tot Return 3-MO* 12-MO* 3-Year* 5-Year* Closing Value
S&P 500 7.20% 15.66% 14.92% 11.62% 2,913.98
Dow Jones Industrial Average 9.01% 18.09% 17.56% 11.83% 26,458.31
NASDAQ Composite 7.14% 23.87% 20.31% 16.36% 8,046.35

Source: Morningstar. The S&P 500, Dow Jones Industrial Average, and NASDAQ Composite are unmanaged indexes. It is not possible to invest in an index. Past performance is no guarantee of future results. * Price only. Does not include dividends.

All overviews and commentary are intended to be general in nature and for current interest, educational purposes and factual reference only and are subject to change based on market and other conditions.

Denali Wealth Management

2018 Q2 Market Commentary

General Market Commentary as of June 30, 2018

The volatility introduced into the stock market earlier this year by trade tiffs and tantrums has naggingly persisted into summer. All this has played out against the background of a surging U.S. economy. While domestic growth estimates for the second quarter have risen to an annualized rate of 5 percent, double the pace set in the last quarter, the European, Chinese and Japanese economies are decelerating.

Then there’s the headwind of rising interest rates envisioned by the Fed. Add to that the potential inflationary impact of an all-out trade war, and it’s no wonder the markets are rocky.

September Considerations

By the time Labor Day hits in early September, we will have critical clarity regarding the following:

1. Whether there is a full-blown U.S./China trade war or not?

2. How many Fed rate hikes this year (Three or Four)?

3. Does North Korea continue to cooperate with the U.S.?

4. Will the “Goldilocks” economic dynamic of strong growth and tame inflation reappear?

5. Can the rise in the 10-year yield and U.S. Dollar remain “orderly” or does it cause a pullback in stocks?

Market Recap

Tot Return 3-MO* 12-MO* 3-Year* 5-Year* Closing Value
S&P 500 2.88% 12.17% 9.63% 11.10% 2,718.37
Dow Jones Industrial Average 0.70% 13.69% 10.24% 10.58% 24,271.41
NASDAQ Composite 6.31% 22.31% 14.62% 17.15% 7,510.30

Source: Morningstar. The S&P 500, Dow Jones Industrial Average, and NASDAQ Composite are unmanaged indexes. It is not possible to invest in an index. Past performance is no guarantee of future results. * Price only. Does not include dividends.

All overviews and commentary are intended to be general in nature and for current interest, educational purposes and factual reference only and are subject to change based on market and other conditions.

Denali Wealth Management

2018 Q1 Market Commentary

General Market Commentary as of March 31, 2018

Global equity markets declined in Q1 with investors unnerved first by concerns about the path of US interest rates and then worries over trade. Global bond markets reflected higher inflation, with most major government bond yields climbing.

Equities

US equities began the year strongly, boosted by tax reforms, but ended the quarter lower amid concerns over inflation and the impact of US-China trade sanctions. Indeed, macroeconomic indicators remained broadly positive throughout Q1. US business confidence reached an unexpected, multi-decade high in March. GDP for Q4 2017 was revised upwards to show growth of 2.9%, and while industrial activity slowed, as measured by the ISM manufacturing index, it continued to indicate expansion.

Treasury

US Treasury yields rose markedly across the curve over the quarter. Corporate bonds made negative total returns and underperformed government bonds.

Market Recap

Tot Return 3-MO* 12-MO* 3-Year* 5-Year* Closing Value
S&P 500 -1.17% 11.83% 8.51% 10.98% 2,640.87
Dow Jones Industrial Average -2.49% 16.65% 10.68% 10.58% 24,103.11
NASDAQ Composite 2.33% 19.50% 12.96% 16.67% 7,063.45

Source: Morningstar. The S&P 500, Dow Jones Industrial Average, and NASDAQ Composite are unmanaged indexes. It is not possible to invest in an index. Past performance is no guarantee of future results. * Price only. Does not include dividends.

All overviews and commentary are intended to be general in nature and for current interest, educational purposes and factual reference only and are subject to change based on market and other conditions.