The first quarter of 2019 will be a tough act to follow. The S&P 500 posted its best first quarter performance since 1998, rising 13%. The Nasdaq and the DJIA climbed 16.5% and 11.1% respectively, and are well within striking distance of surpassing all-time highs, again. What a difference a quarter makes, and what a difference Fed policy has made on investor sentiment. The Federal Reserve’s shift from hawkish to dovish from mid-December to early March stopped a brutal correction in its tracks and put risk back in the driver’s seat.

History is on the Bull’s side. LPL Financial Senior Strategist Ryan Detrick says, “A big start to the year historically has suggested the bulls could remain in charge the rest of the year… In fact, 9 of the past 10 times the S&P 500 was up at least 10% during the first quarter, the rest of the year was also in the green.” That doesn’t mean we should expect double-digit gains the rest of the year, however. Looking at the previous 10 instances of double-digit gains in the first quarter, the average return for the final three quarters of the year has been 5.8%, which is actually lower than the average year’s final three quarters of 6.3%.

This week, the focus in the U.S. will be on the Jobs report for March, due out Friday. Economists surveyed by Reuters estimate that 175,000 jobs were added last month. But there will be a lot of second guessing given February's disappointing report showing only 20,000 jobs added in the month. That number could be revised on Friday at 8:30 a.m. ET, when the non-farm payrolls are released.

A Global Quarter to Remember

To be sure, it was not only the U.S. that posted a strong quarter. Major markets around the world rallied despite slowing economies, uncertainty around the trade war, the Brexit breakdown and other obstacles. Even Italy, which is on the brink of a recession, posted a 14% return in its equity market.

Here’s how major global equity markets popped in the first quarter of 2019:

  • China: 15.7%
  • Canada: 15%
  • Italy: 14%
  • Hong Kong: 13.6%
  • Russia: 13.3%
  • Switzerland: 12.7%
  • Greece: 10.9%
  • Australia: 10.1%

Trade Negotiations

We are well beyond the self-imposed deadline for the U.S. and China to reach a trade agreement, but the two countries agreed to move that goal post last month and negotiate in good faith citing progress on major issues. According to trade representatives from both sides, progress is being made and Chinese officials are headed to Washington this week for more meetings. Reuters reported last week that the two sides had agreed to key trade concessions and sticking points around forced technology transfers for U.S. companies doing business in China. At issue, per Reuters, is that U.S. companies say they are often forced to disclose trade secrets and proprietary information to Chinese companies as a condition for doing business in the country. They claim that their technology is then transferred and used by Chinese competitors.

Brexit

Last week, members of the U.K. Parliament rejected Prime Minister Theresa May's withdrawal agreement for the third time by a wide margin. This means the U.K. has missed a deadline to delay Brexit until May 22 and leave the EU with a deal in place. May has until April 12 to seek a longer extension and avoid what is known as a "hard Brexit," which would mean leaving the EU without a deal. That prospect holds the most political and economic uncertainty. On Tuesday, she will take her party’s plan back to Parliament for a fourth vote. If this one also fails, she may be forced to seek a broader extension on Article 50 – if she is still the Prime Minister at the end of the week.

IPOs Post-Lyft

Lyft Inc. (LYFT) officially broke the deal on unicorn stocks testing the public markets with its debut on Friday. While investors bid up the stock more than 20% at the open, it only managed to hold gains of 8.5% at the close. Still, Lyft was able to prove that a 7-year-old company that lost over $900 million last year in the ultra-competitive market of ride-hailing, can be valued at over $20 billion by the public. IPO watchers expect Uber, its larger more global competitor, to go public in April. It is being valued at $128 billion despite losses of $2.2 billion in 2018. Investors' renewed love affair with technology stocks makes testing the public markets an easier decision for companies like Uber, Pinterest, Postmates and AirBnB. It should be a busy Spring.

Politics/Drug Prices

Expect to hear a lot more political talk about lowering prescription drug prices in the U.S.. President Trump has been talking about it since he was a candidate, and with a little less than two years to go in his term, his administration says he intends to make it a focus now and will work with Democratic leaders on policy.

Executives from companies including AbbVie Inc. (ABBV), AstraZeneca PLC (AZN), Bristol-Myers Squibb Co. (BMY), Johnson & Johnson (JNJ), Merck & Co. Inc. (MRK), Pfizer Inc. (PFE) and Sanofi SA (SNY), have already testified in Washington in February, but expect them and the entire pharmaceutical industry to go under the microscope again soon.

Oil Prices Are Gushing

If you thought stocks had a strong quarter, take a look at oil. West Texas Intermediate crude oil, the U.S. benchmark, rallied 32.4% in the first three months of the year, its best quarterly performance in a decade. Brent crude oil spiked 27%, also its best quarter since 2009.

Prices have spiked as OPEC and other non-affiliated oil producing nations like Russia have agreed to production cuts as the global economy has slowed, prices have faltered and uncertainty has swirled given the trade war between the U.S. and China. In the U.S., rig count in the Gulf of Mexico fell for the sixth week in a row. We’ll see reports on oil stockpiles in the U.S. on Wednesday and rig counts again on Friday.

Buckle up for a busy month!