US share indices hit fresh highs

Economic growth picked up in the US during the first quarter of 2019. Having expanded by 2.2% year on year in the final quarter of 2018, the US economy grew at an annualised rate of 3.2% over the first three months of 2019. The Nasdaq Index and the S&P 500 Index hit new highs during April.

  • The Sino/US trade conflict remained unresolved
  • The IMF trimmed its US GDP growth forecast for 2019
  • President Trump urged the Fed to cut rates and reintroduce quantitative easing 

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Economic growth picked up in the US during the first quarter of 2019. Having expanded by 2.2% year on year in the final quarter of 2018, the US economy grew at an annualised rate of 3.2% over the first three months of 2019. Although growth in consumer spending slowed from 2.5% to 1.2% over the period, overall expansion was underpinned by strong export activity and inventory-building. The International Monetary Fund (IMF) cut its forecast for US economic growth in 2019 from 2.5% to 2.3%, but increased its 2020 forecast from 1.8% to 1.9%. President Donald Trump urged the Federal Reserve (Fed) to cut interest rates by 1% and resume quantitative easing measures in order to support growth.

“The S&P 500 hit its 93rd closing high since the November 2016 Presidential elections”

The Dow Jones Industrial Average Index rose by 2.6% during April, while the S&P 500 Index and the Nasdaq Index climbed by 3.9% and 4.7% respectively. The Nasdaq Index and the S&P 500 Index hit new highs during April; according to S&P Dow Jones Indices, the S&P 500 hit its 93rd closing high since the November 2016 Presidential elections. The best-performing S&P sectors during April were financials, information technology, and communication services; in contrast, health care, real estate, and energy ended the month in negative territory.

The trade conflict between the US and China remained unresolved in April, although President Trump was bullish about the prospect of an eventual deal, saying: “We’re very well along on the deal.  It’s a very complex deal.  It’s a very big deal.  It’s one of the biggest deals ever made.  Maybe the biggest deal ever made”. Nevertheless, the IMF warned that macroeconomic conditions, rather than tariffs, remain the primary drivers behind trade imbalances. Talks between the US and China are set to continue in May.

The US economy added 196,000 new jobs in March, compared with 33,000 in February. However, growth in average annual earnings decelerated from 3.4% in February to 3.2% in March.

Credit ratings agency Fitch affirmed its “AAA” rating and “stable” outlook for the US, citing the country’s “structural strengths”, including the economy’s size, high per-capita income, and dynamic business environment. Fitch also highlighted the US Treasury market’s status as the world’s deepest and most liquid asset market, and the US’s high tolerance to debt, but warned that “rising deficits and debt” could place this tolerance under pressure in the absence of reform. 


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