This article is from our archives as part of the 100th issue special, celebrating twenty-five years of quarterly newsletters.
Policy matters. Natural Investments has participated in public policy conversations and attended meetings on the Hill in Washington, D.C., for years and will continue to serve as a voice for fair and just financial regulations.
It’s been over a year since the fall of Lehman Brothers sparked major tremors in the U.S. financial system that rippled around the planet. Though lawmakers called for reform, much of the financial services industry remains unchanged a year later. The wholesale restructuring advocated by the social investment industry, economists, and academics has thus far been met with strong opposition from the industry, and Congress’ lack of expertise left them unable to do anything other than infuse large banks with cash.
The needed structural changes in our system remain conceptual and haven’t even been fully debated. Yes, there were calls for bonuses to be recalled and executive pay to be restricted,
Both stock and bond markets rebounded strongly during the first quarter of 2019. In the U.S., large company stocks rose 13.6%, small companies were up 14.6%, and bonds were up 2.9%. Foreign stocks rose 10%. The markets were lifted by news that the Fed had reduced the number of planned interest rate increases for 2019, from a prior estimate of three hikes down to zero. Reports of slowing global economic growth and low inflation contributed to the revised interest rate position.
The final quarter of 2018 hit with a dramatic downturn for the stock market, while bond investments generally performed well. Large U.S. company stocks were down 13.5% over the quarter and down 4.4% for 2018. Small company stocks were down 20.2% this quarter and 11% on the year. Bonds were 1.6% higher for the quarter, though they were flat for the year.
The fourth quarter setback for stocks was abrupt and vexing. Large company stocks had recently risen 10.5% by the end of the third quarter. But by the year’s end, they were down 4.4% in a sharp reversal. Analysts have been reminding investors for years that a notable sell-off could arrive unexpectedly as the rising market endured longer and longer.
Stock markets were generally higher over the waning months of summer, with stocks of large US companies for the quarter up by 7.7%, small U.S. companies up 3.6%, and foreign stocks up 1.4%. Bonds, broadly measured, were flat for the quarter, though down 1.6% so far this year.
Trade tensions have remained front and center in economic news as the administration has continued to press for additional tariffs, as announced during the quarter. However, vigorous growth of the U.S. economy,