The Madison Mosaic

The Madison Mosaic - March 2019

The Macro Pieces

A yo-yo market; S&P 500 up 13.7% for 1Q 2019 (best calendar quarter since 3Q 2009) after dropping -13.5% in 4Q 2018 (worst calendar quarter since 3Q 2011).

While a welcome relief, the rally has been more about multiple (P/E) expansion (S&P 500 forward P/E from 13.5 to 16.4) than earnings (y/y earnings growth estimated at -3.8% for 1Q).

A permanent vacation?

-Federal Reserve surprisingly dovish; no longer sees any interest rate hikes in 2019 (markets are now forecasting high odds of a cut).

-The yield curve inverted to the 10-year note after the March Fed meeting. 10-year U.S. Treasury yield finished the quarter at 2.41%; down from 3.23% in early November.

-We’re concerned that the U.S. economy is struggling to digest the 200 bps of Fed rate hikes and ongoing balance sheet reductions since late 2016.

Global economic data remains challenged and there is elevated risk of a possible global recession.

On the bright side:

-Chinese economic data appears to be stabilizing after past stimulus efforts.

-U.S. consumer confidence remains resilient (near 20-year highs) and employment is healthy.

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  • “Madison” and/or “Madison Investments” is the unifying tradename of Madison Investment Holdings, Inc., Madison Asset Management, LLC, and Madison Investment Advisors, LLC, which also includes the Madison Scottsdale office. Madison Funds are distributed by MFD Distributor, LLC. Madison is registered as an investment adviser with the U.S. Securities and Exchange Commission. MFD Distributor, LLC is registered with the U.S. Securities and Exchange Commission as a broker-dealer, and is a member firm of the Financial Industry Regulatory Authority.

    Indices are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only, and do not represent the performance of any specific investment. Index returns do not include any expenses, fees or sales charges, which would lower performance.

    S&P 500® INDEX: Widely regarded as the best single gauge of the U.S. equities market, this world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 focuses on the large-cap segment of the market, with over 80% coverage of U.S. equities, it is also an ideal proxy for the total market.

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    RUSSELL 2000®: Russell 2000®Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which represents approximately 11% of the total market capitalization of the Russell 3000® Index.

    As of 12/31/2018, Morningstar defined Small Cap, Mid Cap and Large Cap stocks as stocks with market capitalizations between approximately $600 million and $3 billion, $3 billion and $16 billion and $16 billion and above, respectively.

    Although the information in this report has been obtained from sources that the firm believes to be reliable, we do not guarantee its accuracy, and any such information may be incomplete or condensed. All opinions included in this report constitute the firm’s judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not a guarantee of future results.

    In addition to the ongoing market risk applicable to portfolio securities, bonds are subject to interest rate risk. When interest rates rise, bond prices fall; generally, the longer a bond’s maturity, the more sensitive it is to this risk. Bonds may also be subject to call risk, whichallows the issuer to retain the right to redeem the debt, fully or partially, before the scheduled maturity date. Proceeds from sales prior to maturity may be more or less than originally invested due to changes in market conditions or changes in the credit quality of the issuer.

    Foreign Security and Emerging Market Risk: Investments in foreign securities involve risks relating to currency fluctuations andto political, social and economic developments abroad, as well as risks resulting from differences between the regulations to which U.S. and foreign issuers and markets are subject. These risks may be greater in emerging markets. The investment markets of emerging countries are generally more volatile than markets of developed countries with more mature economies.

    Nothing contained herein is intended to be a recommendation to buy or sell any security nor is it intended to represent the performance of any Madison Fund or product. Madison Asset Management, LLC. ©April 8, 2019 - All Rights Reserved.



  • “Madison” and/or “Madison Investments” is the unifying tradename of Madison Investment Holdings, Inc., Madison Asset Management, LLC, and Madison Investment Advisors, LLC, which also includes the Madison Scottsdale office.  Madison Funds are distributed by MFD Distributor, LLC.  Madison is registered as an investment adviser with the U.S. Securities and Exchange Commission.  MFD Distributor, LLC is registered with the U.S. Securities and Exchange Commission as a broker-dealer, and is a member firm of the Financial Industry Regulatory Authority. 

    Madison Investments shares all personnel and resources at their Madison, Wisconsin location. Statistical data is for the consolidated Madison organization. The Madison organization consists of its holding company, Madison Investment Holdings, Inc. and its affiliates: Madison Asset Management, LLC; Madison Investment Advisors, LLC; and Hansberger Growth Investors, LP. Asset information presented includes non-discretionary assets. Refer to each entity’s Disclosure Brochure for more information.

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