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Monthly Market Review

April 2019

Monthly Market Review

T. Rowe Price

U.S. Stock Market

Stocks recorded solid gains in April, continuing their strong start to the year. The S&P 500 and Nasdaq Composite Indexes hit new all‑time highs at the end of the month, while the other major benchmarks remained modestly below the peaks they established in the fall of 2018. Trading volumes were generally muted despite the release of many first‑quarter earnings reports. Volatility was also notably subdued, with the Cboe Volatility Index (VIX) touching its lowest level in six months.

Sector performance varied widely. Within the S&P 500 Index, financial shares rose 9% on a total return basis, helped by better‑than‑expected earnings results from J.P. Morgan Chase. Communication services shares were also strong, lifted by an earnings beat from Facebook and enthusiasm over Walt Disney’s plans for a new video streaming service. A rise in Microsoft shares helped drive strong gains in technology stocks and propelled the company past USD 1 trillion in market capitalization for the first time—a threshold matched only briefly by Apple and Amazon.com. Health care shares fell nearly 3%, with insurer stocks dragged lower by fears over seeming momentum for a change to a single‑payer system.

Recession Fears Abate

Renewed confidence in the global economy seemed to be a primary factor boosting sentiment in April. The S&P 500 Index had its best and biggest daily move of the month on April 1, following news of a resurgence in the ailing Chinese manufacturing sector—often viewed as a barometer of global economic conditions. Investors were also encouraged by favorable gauges of U.S. manufacturing and service sector activity. Rising oil prices throughout much of the month seemed to reflect healthy global demand, although the Trump administration’s decision to stop granting sanctions waivers for Iranian oil imports also played a role.

April’s labor market data were especially strong. March payrolls rose more than expected, February’s disappointing print was revised higher, and weekly jobless claims reached new five‑decade lows. Wage growth slowed a bit during March, but the month saw a sharp rise in retail sales. Moreover, consumers appeared to be buying more without paying higher prices. While the Federal Reserve’s preferred inflation measure, the core (less food and energy) personal consumer expenditures price index, moderated somewhat in March, actual personal consumption expenditures rose at their fastest pace in nearly a decade. Not surprisingly, gauges of consumer confidence remained just below cycle highs.

Total Returns

 

April

Year-to-Date
Dow Jones Industrial Average

2.66%

14.79%

S&P 500 Index

4.05

18.25

Nasdaq Composite Index

4.74

22.01

S&P MidCap 400 Index

4.02

19.09

Russell 2000 Index

3.40

18.48

Past performance is not a reliable indicator of future performance.
Note: Returns are for the periods ended April 30, 2019. The returns include dividends based on data supplied by third‑party provider RIMES and compiled by T. Rowe Price, except for the Nasdaq Composite Index, whose return is principal only.
Sources: Standard & Poor’s, LSE Group. See Additional Disclosures.

Hopes Grow That Trade Deal Is Near

Investors also appeared encouraged by a more stable policy environment. Early in the month, President Donald Trump announced that the U.S. and China were nearing an “epic” trade deal. While no deal materialized by the end of April, high‑level talks continued, and President Trump stated near the end of the month that Chinese President Xi Jinping would soon visit Washington, presumably to sign an agreement. Investors may have also been relieved by the European Union’s decision to grant the British government a six‑month extension to develop a new Brexit plan.

Reports released by the end of April indicated a modest overall decline in large-company earnings in the first quarter, but investors seemed pleased that companies were mostly able to hold on to the surge in profits they had enjoyed in 2018. As of April 26, FactSet was estimating that overall earnings for the S&P 500 had declined by 2.3% versus the year before, held down in part by higher labor costs. Revenues were expected to have grown by a little over 5%, however, and analysts polled by FactSet expected earnings growth to resume at a moderate pace later in the year.

Expansion Is Likely To Continue, But Its Benefits May Become More Concentrated

While the expansion appears poised to enter a record 11th year in July, the recovery from the financial crisis has been an exceptionally slow one that has restrained the “animal spirits” of both consumers and investors. The absence of any late‑cycle excesses—as exemplified by the latter stages of the dot‑com boom of the 1990s and the housing boom of the next decade—makes us optimistic that the current expansion has room to run. Nevertheless, as the impact of the December 2017 tax cuts on year‑over‑year earnings comparisons rolls off and fiscal stimulus wanes, earnings growth should be harder to come by and thus concentrated in fewer companies. This could favor an active approach to investing, along with careful fundamental research to identify firms able to leverage competitive advantages and prosper in a more challenging environment.


Additional Disclosures
FactSet. Copyright 2019 FactSet. All Rights Reserved.

J.P. Morgan. Information has been obtained from sources believed to be reliable, but J.P. Morgan does not warrant its completeness or accuracy. The index is used with permission. The Index may not be copied, used, or distributed without J.P. Morgan’s prior written approval. Copyright © 2019, J.P. Morgan Chase & Co. All rights reserved.

London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). © LSE Group 2019. FTSE Russell is a trading name of certain of the LSE Group companies. “Russell®” is a trade mark of the relevant LSE Group companies and is used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.

The S&P 500 Index and S&P MidCap 400 Index are products of S&P Dow Jones Indices LLC, a division of S&P Global, or its affiliates (“SPDJI”) and have been licensed for use by T. Rowe Price. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC, a division of S&P Global (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); T. Rowe Price is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index and S&P MidCap 400 Index.


Important Information

This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action.

The views contained herein are those of the authors as of May 2019 and are subject to change without notice; these views may differ from those of other T. Rowe Price associates.

This information is not intended to reflect a current or past recommendation, investment advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. The opinions and commentary provided do not take into account the investment objectives or financial situation of any particular investor or class of investor. Investors will need to consider their own circumstances before making an investment decision.

Information contained herein is based upon sources we consider to be reliable; we do not, however, guarantee its accuracy.

Past performance is not a reliable indicator of future performance. All investments are subject to market risk, including the possible loss of principal. All charts and tables are shown for illustrative purposes only.
T. Rowe Price Investment Services, Inc., distributor, and T. Rowe Price Associates, Inc., investment advisor.

© 2019 T. Rowe Price. All rights reserved. T. Rowe Price, INVEST WITH CONFIDENCE, and the bighorn sheep design are, collectively and/or apart, trademarks of T. Rowe Price Group, Inc.

201905‑840209

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T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®). TRP has been independently verified for the twenty one- year period ended June 30, 2017 by KPMG LLP. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.

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