May 2019

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Kevin: Greetings. May 8, 2019, Market Update. A bit of a change since our last update in February. John maybe retrace our steps, fourth quarter of 2018 to now.

John: Well, fourth quarter was ugly. We had the market's down almost 20%, but we're seeing a nice bounce back so far this year, almost 16% through yesterday. So that's being led by again, growth and, in this case a little bit more small cap, mid cap, than large cap, but still a growth story.

Kevin: You have international behaving a little bit better, some signs of improvement there. But so we're 2% below the all time highs now, which was what established recently, 10 years or so, just about near the longest expansion ever. A lot of people will say that that's cause for concern. Just because it's an old rally, does it mean that we're at the final hour? Or what are the positive signs you still see out there?

John: While I'm comfortable saying that we're in late stage of the cycle, but who's the say when the cycle's going to end? There's plenty of things underpinning the market that could cause us to think that it may have legs for a little bit longer.

Kevin: Well, the feds backed off, so the market likes that. Volatility is decreased because of that. Earnings have been positive. Valuations, at least if you believe that the earnings are sustainable, are reasonable.

John: Well, most stocks, except for the ones that have been leading the market, most stocks are down about 13% on average from their 52 week high. So it's still a pretty much a large cap growth tech story, that's been driving the market.

Kevin: So you do have a concentrated rally still here and a slower growth environment, which we've had since 2007. That's normally the types of stocks that are going to behave better, are the stocks that have more visible earnings growth. But then you have more of your value plays, stocks that some of the stock managers we talk to where they are actually seeing valuations that are attracted to them.

John: Right. Well, and from an economic perspective, we've got very strong employment, which is good when consumer's continuing to spend. That's also another supportive factor. There's plenty of things we can point to as being potential headline risk, certainly the tariff situation, Brexit, China, you name it.

Kevin: Well, interest rates, wage inflation, things of that nature.

John: Yes.

Kevin: But in the meantime, steady as she goes. Well, you've talked about those risks and I think and as you go forward, certainly it's not a bad time if you need liquidity in the near future is trimming from the areas that have been going up and or adding to areas that have not been participating as much. My hindsight's 20/20, it's my foresight I have trouble with. And without further ado, I guess we'll hopefully see some warmer weather in Chicago and we'll be talking to you in August.