The markets continued their upward trajectory in February with virtually all equity indexes up multiple percentage points for the month, including the S&P 500, which finished the month at +3.2%. Further, most fixed income indexes were up slightly as well, again continuing the positive start to 2019.
The movement in the markets – and the noteworthy absence of any meaningful volatility – are largely attributable to continued signs of economic strength. Overall, corporate earnings results remain constructive, unemployment remains near historical lows, manufacturing activity remains expansionary, and consumer confidence remains strong.
Indeed, the February consumer confidence gauge was a particularly interesting data point, which increased markedly to 131.4 from 121.7 in January. Moreover, consumers’ optimism about future economic prospects jumped even more dramatically to 103.4 in February from 89.4 in January. The resolution of the government shutdown and agreement of the federal budget are likely the main drivers of the sharp increase.
Generally benign geopolitical developments have also contributed to favorable market performance. For instance, trade talks between the U.S. and China have been encouraging enough for President Trump to halt a planned hike in tariffs, a move that has kept tensions from escalating – at least for the time being. Developments with trade, and other major geopolitical topics like Brexit, will remain key watch points for investors in coming months.