1st Quarter Market Commentary

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1st Quarter 2019

What a difference a quarter makes. The economy continues to expand even as its rate of growth slows. Despite anxieties about a recession, there is little on the horizon in terms of leading economic indicators to suggest that an economic recession is imminent. This is important because history would suggest an extended market decline is almost never seen outside periods coinciding with an economic recession. While the rate of economic growth is unquestionably slowing, it is not reversing, and the economy is not shrinking.

The US markets had their best start to the year for over 20 years as growth factors outperformed led by technology which was the best performing sector for the quarter at 19.9%. Within equities, US markets led the way with a return of 13.5% (S&P 500), outperforming international developed markets and emerging markets which returned 10.1% (MSCI EAFE) and 10.0% (MSCI Emerging Markets) respectively.

Bond sectors saw big reversals with the sudden fall in rates in March following the shift in the Federal Reserve outlook to a dovish stance. The 10-year Treasury yield started March at 2.76% and fell to 2.41% by end the quarter. international developed bonds returned 1.5% (Bloomberg Barclays Global Aggregate ex USD),

For the past 10 years, investors have seen active managers underperform indexes, growth momentum outperform value, large-cap stocks outperform small-cap stocks, and US markets outperform international. Investors may be saying diversification doesn’t work and tactical strategies are a waste. However, the last ten years is not indicative of the range of scenarios investors can expect in the long term.


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The NERT model allocations are designed to help participants build diversified allocations to capture the major market sectors and a variety of management styles. They are offered to aid typical participant needs for diversified, risk-adjusted allocations. NERT rebalances allocations on a regular basis attempting to keep a consistent risk and asset posture. The allocations will maintain some exposure even in underperforming classes. Diversification, by definition, means not all assets can have positive performance every period. The NERT model allocations are designed to allow any investor to participate in proven ways to reduce risk and improve returns over longer periods.