Stock market's first quarter in 2019 could be better than rest of the year


Despite the flat ending yesterday, the Dow Jones industrial average has had its best quarter in nearly a decade.

The S&P had a previous three-day winning streak, but that could all be changing.

STA Wealth Management's Michael Smith said liquidity to markets is what blood is to human bodies.

"If you lose any of it, it can create major problems. And, what we've seen is a shift from the Federal Reserve, where they've been raising interest rates, they have now pivoted. There's even discussions that they may cut, so that adds liquidity back into the market," said Smith.

In addition, China has added a significant amount of liquidity in January, which has helped pushed things further.

U.S.-Chinese trade negotiations resume this week.

However, if the Federal Reserve decides to cut interest rates, it might weaken the economy.

Smith expects pockets of volatility through the end of the year.

"You see the markets move higher, but I would say that there's going to be volatility along the way, so be prepared for that," said Smith.

At the end of a business cycle, is a recession. While it can be delayed, it cannot be avoided. Smith suggests to err on the conservative side rather than aggressive.

He added the IPOs that are coming out are reminiscent of 1999.

And, after a sharp drop in bond yields, they've continued to rise, which helps bank stocks being able to push higher interest rates on loans.

Smith said looking at the 10-year curve, there's an inversion, which is a big signal in the past seven recessions. It's been a precursor indicator with an 85 percent probability.

You can catch STA Wealth Management on KPRC AM 950 from 12 noon to 1 pm, and on KTRH business report at 12 noon.

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