"Yesterday is history, tomorrow is a mystery and today is God's gift; that is why they call it the present."
It's time to look back at the first half of the year and see if we can glean some information about the back half of 2019.
The S&P 500 Index is coming off a sensational first half of the year, up 17.2%. That is the best first half in quite a few years. The start of 2019 was spectacular, following up a dismal December. Could there be more in store for the back half? History says yes, as money continues to flow toward stocks.
Some areas of interest in the first half included technology, homebuilders, consumer discretionary names and gold, which surged late in the month of June to finish up 7%. As is usually the case, stocks were pulled and dragged by Federal Reserve policy and the occasional tweet.
Money flows were quite robust in the quarter. Surprisingly, bonds showed enormous power, enough to drop long-term yields below some of the shorter-term lending rates. This scenario sets up a rate cut or two, likely to come in the second half (early).
The evidence shows the economy is slowing, and the Fed is likely to be pre-emptive with rate cuts in order to stimulate growth. That is always a slippery slope, as the effect of timing of those cuts could be months away. All signs point to cuts coming -- gold is strong, bond yields are down and the dollar has slipped.
The Federal Reserve was in the spotlight once again as it tried to preserve patience in its policy objectives but flipped to a more aggressive dovish stance in early June. This switch was picked up by market players, who saw opportunity to drive equities higher.
For the rest of 2019, Fed policy will continue to be under the microscope. Earnings have been falling during the first half of the year; if that trend continues the multiple on the market will expand. If trade issues are resolved that might free up more money flows into markets, leading to more robust gains ahead.
Finally, if these issues are addressed and the economy turns the corner upward, we would expect to see industrials, banks, transports, technology and consumer discretionary lead the way. Buckle up, it's going to be a fun second half!