Weekly market update

Traders and investors threw a tariff tantrum last week, dumping stocks as fast as they could despite the President putting a hold on implementing the tariffs until May 1st. The Dow fell 5.5% and the NASDAQ fell almost 7% in one week and at the current levels, the Dow is looking to log its worst March in 17 years.

The FED did raise rates last week but that was widely expected and interest rates actually fell with the 10-year U.S. Treasury yield, which fell from 2.9% to 2.81% in the three days since the FED meeting. What’s more, they told us to expect more rate hikes to come. I don’t believe the FED raising rates or telling us there were more hikes to come had much to do with the selloff – it was driven by tariff talks.

There were some big shakeups in the tech world as news broke over Facebook’s use of all of our personal data. But, let’s face it, they know everything about you. If you are a 30-40-year old female, living in Southern California, drive a truck and drink Bourbon – they already know that.

Here at Horizon Financial Services, none of us know what is going to happen in the market next week,  next month or even next year. But the good news is that no one else does either. So it’s an even playing field among all of us, whether you’re Warren Buffett, Joey Home Gamer or anything in between. All we can do is take the data as it comes in, consistently re-evaluate and position ourselves in the direction with the highest probabilities.

ECONOMY

We got some decent housing data over the last week – existing home sells and new home sells were actually pretty good despite the lingering concerns of a supply issue. There aren’t many homes to sell and homeowners are not putting their homes up for sale because they can’t find a replacement. I’m sure Home Depot and Lowes love to hear this.

Jobless claims rose slightly to 229,000, but we are at multi-decade lows.

Manufacturing as measured by the PMI manufacturing survey came in somewhat better.

And we saw significant strength for February’s durable goods orders and with it, significant strength is now the tangible outlook for this year’s factory sector. The most convincing strength in the report comes from core capital goods (nondefense ex-aircraft) where orders surged 1.8%, which is well beyond the high estimate, with related shipments jumping 1.4% in what will give a major boost to business investment in the first-quarter GDP report.

THIS WEEK

We will look to see if the markets can shake off last week’s selling pressure and push back to new highs, but there was a lot of technical damage done last week so don’t be surprised if the “buy the dip” mentality flips to “sell the bounces”. It will take some time to work through this mess. I think the market has bent but hasn’t quite broken. The risk levels are being tested, and in a lot of these important indexes, the caution flags are up. We are fully aware of what needs to happen for us to approach the market from an aggressively bullish perspective and we will be watching this week.

There is a lot of economic data coming out this week such as personal income and spending, consumer sentiment and a number of regional FED reports, but I don’t think they are going to move the needle if we can’t shake out the sellers.

We get earnings coming in April and they are expected to be good. But we just don’t know what is going to come from the trade war talks. They did suspend them until May 1st but the markets aren’t rallying on the news.

So, we will have to see how they linger on market participants over the coming days, so stay tuned and we’ll keep you posted.

Todd Day, Portfolio Manager
Horizon Financial Services, LLC
March 26, 2018

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