Weekly market update
One Hot Mess!
Well! I’m back! Thank you all for the thoughts and prayers in my absence.
October was the worst month for stocks since before I came to work for Horizon Financial Services, LLC and November is like – “we’ll see about that”!
It has been a wild ride for investors and there is no guarantee it is over yet.
Concerns are based on some familiar themes — Fed tightening, a negative economic hit from a strong dollar, The President’s stimulus that is slowly fading, a rout for tech stocks and the U. S-China trade spat. And if all of these aren’t enough, corporate credit has now entered the conversation – the price-action in Credit markets right now is a very real “negative” development for risk-assets.
Rising auto, credit card & student loan debt could/will also weigh on the U.S. economy as interest rates rise. One caveat here – the yield on the 10-year U.S. Treasury has fallen from 3.23% from early this month to 3.07% as of Friday, 11/16.
Oh, and did I forget to mention that business confidence among top corporate executives is weakening.
From the daily flow in the financial media, including “death crosses” and other hair-raising terms, you might think the sky is falling. But two “problems” for investors also contain seeds for tailwinds in the next stock market rally:
- If we were to get some type of positive or even neutral resolution on trade – this would go a long way in boosting corporate confidence and perhaps boost capital expenditures. Take a look at the spikes in U.S. stocks on Thursday and Friday off the headlines surrounding positive news on trade. As a side note, some of the biggest rallies you’ll see are in bear markets.
- If the FED was to take a pause at raising rates. You could say that’s a positive for stocks, but then again, not so much for the economy. It is a fine line between which is more important – I vote for the former over the latter.
Two weeks ago, we saw failed breakout attempts across the entire market in even the “strongest” names. When that happens it’s not our job to question why or get ideological, it is our job to get the heck out of the way.
If you look back to 2015, European banks falling apart led to a selloff in U.S. stocks. When they bottomed in Summer of 2016, that was the signal to load up on risk assets – now is not that time.
So, right now, I prefer cash and bonds – cash is an asset class.
I am certainly not yelling fire in a crowded dance hall but I am making sure I know where the exits are and I have been casually dancing closer to them…
On the earnings front, here are a few names that announced last week and how their stocks performed:
- NVIDIA down 18%
- Williams-Sonoma down 13%
- Nordstrom down 12%
- Applied Materials down 9%
Incidentally, each company posted earnings per share either in-line or ahead of the street’s expectations.
On the economy – we are adding a tremendous amount of jobs, unemployment is about as low as it can get, inflation is tame, but the housing market is a hot mess.
Across the pond – another hot mess.
So, what about going forward? This week is Thanksgiving and I want you all to have a safe and festive time with friends and family and let’s be thankful for all of our blessings. Safe travels and I’ll be back next week to keep you posted.
