The December 2018 equity market sell-off was expedient and to the point. After a strong rebound, the S&P 500 is now back within touching distance of all-time highs. In the US, this continues to be one of the least loved bull markets as most everyone is looking for reasons the market shouldn’t go higher. If bull markets die on euphoria, we are a long way from that.
Has bitcoin and other fellow A list crypto currencies found a bottom in price? Bitcoin’s price went from over $19,000 in late 2017 to under $4,000 last quarter and is now trading around $5,000. The list of nay-sayers seems to be shrinking as more companies and countries start to dabble. Last week France announced it will allow some life insurance products to allow investing in crypto currencies.
The price move to the upside in fixed income over the first quarter of 2019 was just as impressive as the fourth quarter 2018 sell-off. The media made much ado about the slight inversion of the 10- and 2-year US treasury yields, but this is not a full and true yield curve inversion and is more of a media event than a bond market event. However, we are paying attention as the yield curve is not normal. Ms. Market clearly spoke in the first quarter but what did she say? The fed now takes cues from POTUS? Or just this POTUS? Or, we cannot raise rates unilaterally? Or, the economy is truly weakening? Or Powell is still learning the ropes? Or faith in the almighty seers at the fed is weakening? You can find advocates for all the above reasonings. The herd has quickly shifted gears as the narrative has now shifted to no rate hikes from 4 and is now in the process of guessing when the next will be.
The municipal bond space continues to improve both in price as well as credit strength, as well as diminished inventory. This portfolio has better attributes across the board relative to the taxable portfolio and I have much greater conviction in it going forward both on a gross and tax adjusted basis.
REITs had a strong Q1 2019. The US MSCI reit index was up 17.11%. Healthcare, storage, and malls were the laggards. Cell towers, industrial, and data centers were the leaders. Fundamentals improved throughout 2018 (while rates were rising) and remain stable. REITs were at a discount to NAV in late 2018 and early this year but have since retraced and erased much of the discount. Part of the rally can likely be attributed to rate speak; no longer hiking and potentially cutting.