Weekly market update
The major U.S. indices posted solid monthly gains in February, pushing the S&P 500 to its best start to a year since 1991. It is up more than 11% for the year, along with the Dow. The NASDAQ has risen by more than 13% in 2019 and the Russell 2000 has climbed 18%. The NASDAQ is up 10 consecutive weeks—its longest win streak since 1999, the S&P 500 has been up nine of the past 10 weeks and the Dow just suffered its first weekly loss of 2019.
Decreasing trade tensions between China and the U.S., along with declining fears of tighter monetary policy from the Federal Reserve, helped propel stocks higher to kick off 2019.
Small company stocks have outpaced large company stocks, growth stocks have outperformed value stocks and U.S. stocks have outperformed their international counterparts.
Optimism on a more patient FED and optimism surrounding a trade deal have pretty much done the heavy lifting for stocks this year. We have added a new worry on Wall Street and that is fighting between India and Pakistan. Both nuclear powers and Wall Street were watching the developments, amid reports the Pakistani military shot down two Indian jets that had entered its airspace over the contested region of Kashmir, and arrested one Indian pilot. The developments came a day after India bombed what it said was a terrorist training camp in Pakistan, the first cross-border attack over cease-fire lines in almost 50 years, according to reports. We’ll keep an eye on this developing story.
On to the economy—after a long wait, the government shutdown delayed 4th quarter GDP. It was released last week and it showed the U.S. economy grew at a solid 2.6%. That beat expectations but signaled a slowdown from the previous quarter. Overall, the economy grew at 2.9% for 2018 up from 2.2% in 2017.
Also, a bit dated, but December’s housing starts numbers were sharply lower and personal income and spending figures were also below expectations. The spending figures may help to explain the horrible retail sales figures from December. U.S. manufacturing surveys were also showing signs of weakness, but consumer confidence and Chicago PMI numbers did not show any signs of weakness.
We also heard from FED Chair Powell last week at the semi-annual testimony before Congress. He said ‘Patient’ policy was still warranted despite ‘solid’ U.S. growth. Powell says the outlook for the domestic economy is generally favorable and the biggest risks are slowing global growth, particularly China and Europe. He went on to say that “Brexit” is an event risk that could have implications for us.
This week, we “may” get more clarity on a trade deal coming at the end of this month between President Trump and Chin’s Xi Jinping. I have said that an eventual deal could be met with “sell the news” for stocks as many feel like the good news is “baked in” to stocks prices—we’ll see.
Stay tuned and we’ll keep you posted.
Todd Day, MBA
Portfolio Manager
Horizon Financial Services, LLC
March 4, 2019
