Weekly market update
After taking nearly forever to get a trade deal with China done, finally, we got Phase One out of the way—Signed Sealed and Delivered. What a great achievement! At the same time, we got the USMCA (U.S.-Mexico-Canada Agreement) waiting on the President’s desk to be signed. The markets loved it too! The major averages continued to push to new highs.
The S&P500 pushed through 3300 for the first time ever ending up the week by almost 2% as the Dow, NASDAQ and Russell 2000 followed suit.
Headwinds that have been adding to the market’s uncertainty have seen some incremental clarity recently. The FED has pretty much told us that any movement in rates right now is on hold barring something drastic. Trade tensions have eased with the signing of Phase One of the trade deal and it looks like the Brexit will get done hopefully this year. Global central banks remain accommodative and the U.S economy seems to be making a turn for the better.
‘Tis the season for earnings and have they been good—well, mostly. JP Morgan, Citi, Bank of America and Morgan Stanley knocked it out of the park—and many were concerned about the big banks. They weren’t all robust, Goldman Sachs and Wells Fargo did not impress Wall Street. Wells Fargo is still in the penalty box for all of their shenanigans. While many analysts have been concerned at how the “trade war” would impact earnings, at the time of this writing, none of it has come to fruition.
This week will be highlighted by several regional banks, consumer staples giant Procter & Gamble, Discover, E*TRADE and Netflix.
We continue to see interest rates being in a tug of war. While geopolitical tensions will test lower yields/higher prices, improving economics will push rates higher. U.S. Treasury yields across all maturities remained largely unchanged despite improved U.S.-China trade relations. Yet, yields fell after softer than expected inflation data was released.
Across the board, economic data has been impressive, retail sales, the Philly FED index and housing starts came in surprisingly strong, yet industrial production, a gauge of manufacturing, continues to disappoint. The housing data is making fools of anyone that called for a recession last summer. Perhaps warm weather is at play, but single-family starts surged to cycle highs. Builders reporting stronger buyer traffic. Residential investment is going to contribute solidly to GDP in the coming quarters.
While the major indices all experienced record highs last week, which was the best week for stocks since August, earnings could be a big catalyst for stocks in the week ahead. With the U.S./China trade deal on the back burner for now, attention will be focused on trade relations with Europe.
This has been a great start to the new year, and it’s not a straight shot to the moon, but do expect some volatility and pullbacks, but remember to stay tuned and we will keep you posted—make it a great week.
Todd Day, MBA
Portfolio Manager
Horizon Financial Services, LLC
