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With a healthier outlook for global growth, the Fed pause on interest rate hikes, and earnings being a bit better than expected, global equity prices continued moving higher in April. Bond returns were little changed as inflation data continue to be well contained.

The Federal Reserve continued its rhetoric regarding its stance on future interest rate moves. Chairman Powell stated that the Fed Committee will no longer guide markets toward a hike, but will be patient as it determines what future adjustments may be appropriate. It was further confirmed that the Fed is not on a pre‐determined course and will make interest rate changes as necessary. This “data‐dependent” approach is much more market‐friendly than the Fed’s previous pre‐determined rate hike mode.

First quarter GDP came in at a much better‐than‐expected 3.2% gain. 2.0‐2.5% growth had been forecasted. Wage growth for U.S. workers continues to move higher by an annual rate of 3.0‐3.5%, while the number of people working is at an all‐time high. The current unemployment rate is 3.8%. Trade negotiations with China and others remain ongoing, and seemingly have taken a more diplomatic tone.

The European economies are expected to gain momentum in the second half of the year as financial conditions have eased significantly over the past few months. China has undertaken considerable stimulus measures which could be a boon for European manufacturers. Trade agreements remain a key factor toward this outcome.

At its current level, the S&P 500 is trading around 17.5x this year’s expected earnings. Having made up all of the losses from the 4th quarter, stocks now are fairly valued. After the strong gains from the December lows, a moderation in returns should be expected. Fundamentals for U.S. companies remain solid, with inflation being tame and interest rates low. Balance sheets are strong, dividends are increasing, and earnings are still growing, though at more moderate levels. There will continue to be bumps in the road, but current fundamentals remain a positive. Given the recent gains, the most likely scenario for stocks over the near‐term is a range‐bound market.

Best Regards, Clay

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