US stocks chugged higher on strong corporate earnings and the French election. With 60% of firms in the S&P 500 reporting, earnings for the first quarter are on pace to rise 12.5% from a year ago, well above the 9.1% estimate. With the likely election of an EU centric President in France it soothed market concerns of a collapse of the EU. Economic reports were generally solid, but not as strong as recent months. US manufacturing activity expanded, but its pace of growth slowed, auto sales declined, the jobs reports fell well below expectations with only 98,000 jobs added and previous months were revised down by 38,000, retail sales fell, home starts declined, and first quarter GDP growth slowed to 0.7% on weak consumer spending. US stocks gained 1.06% in April raising the year to date performance to 6.86%.
Foreign stocks marched higher in April aided by the election in France. Centrist candidate Emmanuel Macron and far right candidate Marine Le Pen are headed to a runoff vote after the Presidential election in France in late April. Polls suggest that Macron, a pro EU candidate, is expected to win, easing market concerns of the potential demise of the EU. The ECB elected to stand pat with their current easy money policies after their most recent meeting. UK Prime Minister Theresa May called for early elections in June in order to strengthen her position in the country’s upcoming negotiations to leave the EU. China posted a higher than expected 6.9% GDP growth rate in the first quarter, the fastest rate of growth since the third quarter of 2015. Developed markets outpaced emerging markets for the month, but emerging markets well outpaced developed markets for the year to date. In April, international stocks rose 2.20%, bringing the year to date performance up to 10.30%.
Bonds rose over the month as interest rates eased. With the release of the minutes from the Fed’s March meeting it showed that they would likely begin shrinking their $4.5 trillion loan portfolio later this year, a further reduction of accommodative policy. The Fed meets in early May and investors do not expect a Fed Funds rate increase. Inflation eased unexpectedly in March reducing pressure on interest rates. The 10 year Treasury yield fell over April to 2.29%, down from 2.40% to start the month. For the month longer term bonds outpaced shorter terms bonds and credit and muni bonds were the top performing sectors. The broad bond market rose 0.77% in April and is up 1.59% for the year to date.
|Index Performance||April||YTD||Trl 1Yr|
|US Stock (Russell 3000)||1.06%||6.86%||18.58%|
|Foreign Stock (FTSE AW ex US)||2.20%||10.30%||13.31%|
|Total US Bond Mkt. (BarCap Aggregate)||0.77%||1.59%||0.83%|
|Short US Gov. Bonds (BarCap Gov 1-5 Yr)||0.32%||0.72%||0.20%|
|Municipal Bonds (BarCap 1-10yr Muni)||0.64%||2.21%||0.34%|
|Cash (ICE ML 3Month T-Bill)||0.07%||0.17%||0.40%|