| THE MONTH IN BRIEF The Federal Reserve altered its outlook on interest rates in March, and the stock and bond markets certainly took notice. Both the Fed and the European Central Bank communicated that they saw economic growth moderating. Even so, the S&P 500 managed to advance 1.79% for the month. Trade talks continued between the U.S. and China, but without much in the way of real developments. New reports revealed a sudden slowdown in hiring and only mild inflation. Existing home sales accelerated, crude oil gained value, and the Brexit saga took yet another turn.1 DOMESTIC ECONOMIC HEALTH Without a doubt, the major story of the month was the Federal Reserve’s newly dovish stance on monetary policy. The central bank had forecast two quarter-point rate hikes for 2019 in late 2018. On March 20, it held rates steady while projecting only one quarter-point hike through 2021. In announcing this dramatic pivot, the Fed also lowered its estimate of 2019 U.S. economic expansion to 2.1% from the prior 2.3%. Talking to the media after the release of the March 20 policy statement, Fed Chairman Jerome Powell remarked that the “growth of economic activity has slowed,” adding that Fed policymakers saw “some weakening” in the economy, but no signs of a recession.2 More than a few investors interpreted the Fed’s revised outlook as a commentary on the near future. Demand for longer-term Treasury bonds increased, sending their prices higher and their yields lower (bond yields fall when bond prices rise and vice versa). On March 22, the yield on the 2-year Treasury exceeded the yield on the 10-year Treasury. Analysts call this an “inverted yield curve,” and when it happens, the financial media is quick to point out that it could signal a |
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