Stocks and bonds registered the first half of the year with formidable gains propelled by an expected rate cut by the Fed later in the year. It was the best first half of the year since 1997 for equities, with the Dow Jones Industrial Index, S&P 500 Index, and the Nasdaq nearing new highs.
Equities were also driven higher in June by a relief in trade tensions between the U.S. and China as the expectation that the Fed will eventually cut rates sometime this year. Historically, a low-rate environment is favorable for equities in the form of inexpensive capital for expansion and loans.
The rebound in stock prices in the first half of 2019 from the turmoil that hindered markets in December 2018 has been one of the strongest rebounds in decades.
The Federal Reserve gave large U.S. banks the approval to repurchase their own shares and lift dividends, part of the Comprehensive Capital Analysis and Review process set in place by the Fed. Large money center banks as well as smaller regional banks were restricted from buying back their own shares as well as increasing dividends in order to fortify bank balance sheets following the financial crisis.
Sources: Federal Reserve, Dow Jones, S&P, Bloomberg, Reuters
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