March will be jam-packed with geopolitical events that will dictate the investing landscape for the rest of 2019 and beyond, with the two biggest being Brexit and the trade negotiations between the U.S. and China.

U.S. markets have experienced a broad and swift recovery after the correction of late 2018. The S&P 500 is up 19% since its December 24th lows, but still hasn’t hit its 2018 highs.

It’s worth noting that as we end the month in positive territory, history suggests markets usually continue to rise in years where first two months were positive, according to research from LPL Financial.

Ryan Detrick, Senior Market Strategist for LPL says, “since 1950, the S&P 500 has kicked off the year higher each of the first two months 27 times… incredibly, the final 10 months finished higher 25 of those times!”

As we know, past performance is never indicative of future returns. Given the uncertainty surrounding Brexit and the trade talks, anything can happen. Here’s a look ahead at what to expect in March 2009.

Brexit

The deadline for Great Britain to officially leave the European Union is March 29th, but it’s been a bumpy road to get to where we are today. Citizens of the U.K. voted for Brexit on June 23, 2016, with those voting in favor narrowly edging those who voted to remain. Since then, Prime Minister Theresa May, who originally voted against Brexit, has changed course to support the will of the voters.

May survived several “No Confidence” votes from Parliament, cabinet defections from her own party and the loss of a political majority in the House of Commons in 2017. Still, she has persevered, even as the opposition Labour party has opposed May’s Brexit plan at every step.

There are a number of possibilities for what might happen on or before March 29th.

There articles will bring you up to speed:

U.S.-China Trade Negotiations

The original deadline for the U.S. and China to reach an agreement on trade and tariff issues was March 1, but President Trump recently announced that the deadline would be pushed back as negotiations continue between the two countries’ trade representatives. Increased tariffs on $200 billion worth of Chinese imports were to go into effect on March 1st, but that shouldn’t happen as long as the two sides continue to iron out the details of an agreements. 

A potential sticking point in the negotiations is U.S. insistence on the prevention of intellectual and technological property theft by China and the enforcement of rules around it.

The arrest and extradition to the U.S. of Huawei’s CFO, who is accused of supplying telecom equipment and services to Iran via Russia, has also been a point of contention between the two countries, complicating the overall trade agreement. President Trump and members of his administration continue to indicate that progress is being made on the overall agreement, which has helped prop up the stock markets of both countries since the year began. As they say, though, “the devil is in the details,” and we will be following these stories closely for more throughout the month.

Shanghai Composite v. S&P500 Year-to-Date.

Industrial stocks like Caterpillar (CAT), Deere (DE) and 3M (MMM) have all been sensitive the back and forth negotiations between the two countries, but have been on an upswing over the past month as both countries have highlighted progress on the talks.

In the U.S., there are several upcoming economic reports that will give us a good look at strength of the job market, consumer confidence, the housing market and direction on interest rates.

Consumer Health

On March 1st, we will get reports from the U.S Dept. of Commerce on Personal Income, consumer spending (from December, given the government shutdown) and core inflation. Consumer spending makes up 70% of gross domestic product in the U.S., so the health of the American buyer is core to continued growth.

Inflation has been trending lower than the Federal Reserve’s target rate of 2%. As the Fed has changed course on raising rates in 2019 – at least for now – inflation is trending lower, which could prompt Powell and Co. to rethink its plans when it meets on March 20th on interest rates.

Jobs Report

Job creation in the U.S. has remained relatively strong over the past several months, especially in January when over 300,000 jobs were created. That number could be revised next week when the Labor Dept. reports non-farm payrolls on March 8th, but the trend has been robust.

Non-Farm Payrolls, courtesy TradingEconomics.com.

Fed Meeting on Interest Rates

The Federal Open Market Committee will meet next on March 20th on interest rates. Chairman Jay Powell and the Committee have reversed course on interest rates from the end of December into 2019. They had previously indicated that they planned at least two rate hikes in 2019, but changed their tune as the stock market abruptly corrected last November and December. The FOMC’s tune has since been one of patience as the global economy has slowed and capital markets have shuddered. In recent remarks, Powell and other Fed governors have continued to take a “wait and see,” approach, as Brexit and the trade negotiations play out.

They will not be the only ones waiting for resolution on those key issues.

Buckle up for an intense month.

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