-June 28, 2019 Weekly Capital Market Update. The S&P paused and finished flat but on a negative tone for the week yet remains up 17+% for the year. Here is the weekly equity index performance scorecard: The S&P 500 Index declined -0.31% followed by Nasdaq ‑0.32% and Dow Jones Industrial Average -0.45%. This lackluster week is emblematic of the market awaiting news from Presidents Trump and Xi Saturday meeting in Japan. Turning to the corporate health-card, estimated earnings decline for the S&P 500 is -2.6%. If -2.6% is the actual decline for the quarter, it will mark the first time the index has reported two straight quarters of year-over-year declines in earnings since Q1 2016 and Q2 2016. However, so far of the 20 of the companies in the S&P 500 reporting actual results for the quarter, 17 companies have reported a positive EPS surprise and 14 companies have reported a positive revenue surprise. With small business optimism still on the rise, job openings still high, an accommodative Fed system with financial conditions loosening - and with no significant tariff earnings pain yet to materialize – then, perhaps the valuation bar should be set fairly high given the potential for multiple rate cuts this year.
-June 21, 2019 Weekly Capital Market Update. The U.S. equity market rallied for the third consecutive week on news that Presidents Trump and Xi would meet at next week’s G20 summit in Japan, along with the Fed’s new dovish tone toward moving interest rates lower. For instance, the Fed removed the term “patient” in its outlook and added “act, as appropriate, to sustain the expansion.” For the week, the Nasdaq led all indices with gains of +3.01%, followed by the Dow Jones +2.41% and S&P 500 Index +2.20%. Again, we find that the Fed is dictating market sentiment and this bias has overcome tariff concerns; most investment strategists don’t foresee any significant trade developments before next weekend’s G20 summit.
-June 14, 2019 Weekly Capital Market Update. Domestic stocks edged higher on the week with no significant news on tariffs or corporate results (quiet period): S&P 500 Index +0.47%, Nasdaq gained +0.70% and the Dow Jones Industrial Average +0.41%. However, saber-rattling emerged as a geopolitical risk with allegations surrounding Iran’s active role in terrorizing oil tankers. While the economy remains stable, analysts forecast second quarter GDP to be down to the +1% range, while investors will look to upcoming commentary and guidance on the tariff impact from corporate heads during earnings calls next week (Tuesday 205 companies report); estimated earnings decline for the S&P 500 is -2.5%. Also, the markets are also awaiting news from the both the June 18-19 scheduled Fed meeting (probability July rate cut 83%) and later in the month, the G20 meeting - Trump indicated he intends to have a powwow with Xi of China.
-June 7, 2019 Weekly Capital Market Update. After four weeks of consecutive market losses, this week, Federal Reserve Chairman Jerome Powell promised to “closely monitoring the implications of these [tariff] developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective.” We have often written that “don’t fight the Fed” and even in the throws of potential tariff disruption there is an overwhelming bias toward an accommodating Federal Reserve and cheap money. Accordingly, the Dow Jones Industrial led all indices with a +4.71% gain followed by the S&P 500 Index +4.41% and the Nasdaq +3.88%. The market rejoiced the potential of cheaper money (again) in the face of indication of potential hiring slowdown and slowing wage growth (to 3.1%) amid trade tensions with only 75,000 jobs added in May. Also, the World Bank recently revised 2019 estimates of global economic growth from 2.9% from 2.6%. While the S&P 500 companies remain in the quite period before the impending 2nd quarter earnings, the EPS estimates for Q2 has declined by -6.6% over the past 12 months, and by -2.2% since the 1st quarter.
-June 1, 2019 Weekly Capital Market Update. The markets like order and transparency, yet the expanded use of tariffs has caused disorder. First, there was the breakdown in U.S. and China negotiations, then tariff threats on European and Japanese autos and now the latest threat of tariffs on imports from Mexico, our major trading partner; this reinforces trepidation about whether tariffs will ultimately undermine global economic growth. Indeed, President Trump announced plans to impose tariffs on all imports from Mexico in an effort to stop migrants crossing into the U.S. The tariff, effective June 10th, would begin at 5% and escalate at 5% intervals to a maximum of 25% in October. The markets responded negatively with a 4th week where all major U.S. equity indices declined: S&P 500 Index -2.62%, Nasdaq -2.41% and Dow Jones Industrial Average -3.01%.
-June 21, 2019 Weekly Capital Market Update. The U.S. equity market rallied for the third consecutive week on news that Presidents Trump and Xi would meet at next week’s G20 summit in Japan, along with the Fed’s new dovish tone toward moving interest rates lower. For instance, the Fed removed the term “patient” in its outlook and added “act, as appropriate, to sustain the expansion.” For the week, the Nasdaq led all indices with gains of +3.01%, followed by the Dow Jones +2.41% and S&P 500 Index +2.20%. Again, we find that the Fed is dictating market sentiment and this bias has overcome tariff concerns; most investment strategists don’t foresee any significant trade developments before next weekend’s G20 summit.
-June 14, 2019 Weekly Capital Market Update. Domestic stocks edged higher on the week with no significant news on tariffs or corporate results (quiet period): S&P 500 Index +0.47%, Nasdaq gained +0.70% and the Dow Jones Industrial Average +0.41%. However, saber-rattling emerged as a geopolitical risk with allegations surrounding Iran’s active role in terrorizing oil tankers. While the economy remains stable, analysts forecast second quarter GDP to be down to the +1% range, while investors will look to upcoming commentary and guidance on the tariff impact from corporate heads during earnings calls next week (Tuesday 205 companies report); estimated earnings decline for the S&P 500 is -2.5%. Also, the markets are also awaiting news from the both the June 18-19 scheduled Fed meeting (probability July rate cut 83%) and later in the month, the G20 meeting - Trump indicated he intends to have a powwow with Xi of China.
-June 7, 2019 Weekly Capital Market Update. After four weeks of consecutive market losses, this week, Federal Reserve Chairman Jerome Powell promised to “closely monitoring the implications of these [tariff] developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective.” We have often written that “don’t fight the Fed” and even in the throws of potential tariff disruption there is an overwhelming bias toward an accommodating Federal Reserve and cheap money. Accordingly, the Dow Jones Industrial led all indices with a +4.71% gain followed by the S&P 500 Index +4.41% and the Nasdaq +3.88%. The market rejoiced the potential of cheaper money (again) in the face of indication of potential hiring slowdown and slowing wage growth (to 3.1%) amid trade tensions with only 75,000 jobs added in May. Also, the World Bank recently revised 2019 estimates of global economic growth from 2.9% from 2.6%. While the S&P 500 companies remain in the quite period before the impending 2nd quarter earnings, the EPS estimates for Q2 has declined by -6.6% over the past 12 months, and by -2.2% since the 1st quarter.
-June 1, 2019 Weekly Capital Market Update. The markets like order and transparency, yet the expanded use of tariffs has caused disorder. First, there was the breakdown in U.S. and China negotiations, then tariff threats on European and Japanese autos and now the latest threat of tariffs on imports from Mexico, our major trading partner; this reinforces trepidation about whether tariffs will ultimately undermine global economic growth. Indeed, President Trump announced plans to impose tariffs on all imports from Mexico in an effort to stop migrants crossing into the U.S. The tariff, effective June 10th, would begin at 5% and escalate at 5% intervals to a maximum of 25% in October. The markets responded negatively with a 4th week where all major U.S. equity indices declined: S&P 500 Index -2.62%, Nasdaq -2.41% and Dow Jones Industrial Average -3.01%.