April 2019 Monthly Market Review
Risk aversion declined further in April, helping equities continue to deliver broad gains following the confirmation of the Fed’s dovish stance. Other central banks followed suit in April and became more dovish which also improved investor sentiment.
The Federal Open Market Committee’s April meeting was held on the last day of the month. While the Fed stayed on hold and generally guided for no additional rate hikes, the minutes revealed the Fed actively discussed its rate stance and that participants were open to raising rates if conditions improve. Many interpreted the minutes as confirmation of the Fed’s dovish pivot and that it would be patient in its approach to monetary policy. The ECB held rates steady and maintained its guidance for the future path of rates. Comments made by President Mario Draghi at the post-meeting press conference also helped cement its dovish stance. The Bank of Japan did not adjust policy at its meeting at the end of April. This was widely expected, but the bank surprised markets by removing its timeframe for hitting its 2% inflation target, which served as a dovish signal.
The impact from central bank posturing was a rise in global yields. Bond markets across the globe fell during the month. Outside of bond markets, the upward move in yields pressured rate-sensitive markets like REITs. The FTSE EPRA/NAREIT Developed Index fell during the month, with pressure in Asia (−3.2%), Europe (−1.1%), and the U.S. (−1.3%). However, rising yields were accompanied by strong gains in equity markets.
U.S. equity markets posted a fourth consecutive month of positive performance. The S&P 500 Index reached new all-time highs in April, erasing the losses from late 2018. Over the same timeframe, the technology-heavy NASDAQ Composite Index also performed strongly (+31.2%).
Growth stocks maintained leadership over their value counterparts. The boost that the IT and communications services sectors provided the growth index outweighed the benefit that strength in financials stocks provided the value index. Large caps finished modestly ahead of small caps.
Japan was among the best performing non-U.S. equity markets. Japanese stocks shrugged off disappointing economic data, helped by a potential U.S./China trade deal. The bigger news in Japan was the historic imperial transition that took place. On April 30th, Emperor Akihito became the first Japanese emperor to abdicate since 1817. His eldest son, Crown Prince Naruhito, ascended shortly thereafter. The transition could lead to financial disruption as it coincides with the country’s Golden Week holiday period. As a result, most Japanese markets will be closed for more than a week, re-opening May 7th.
Brexit remained in the headlines as European Union leaders granted another delay, the second extension in the span of less than a month. The U.K.’s new Brexit date is now set for October 31st, but there is flexibility for Britain to leave earlier if an agreement can be reached.