Weekly market update
What a quarter for the record books! The Dow rose 11.8%, the S&P 500 rose 13.65%, the NASDAQ gained 16.8% and the Russell 2000 gained 14.5% and this as analysts are screaming about a global slowdown and inverted yield curves. In March, it was a different story where we say the NASDAQ rose nearly 4% for the month, but small caps lagged badly.
Looking at sector performance—technology (XLK) led the way, returning 19.3% followed by Real Estate (XLRE) at 16.8% and industrials (XLI) up 16.4%.
We’ve seen quite a turnaround after the market tanked late last year on worries about global economic growth stemming from the U.S.-China trade war and concerns about a potentially too-aggressive Fed.
One leg of the market’s recovery this past quarter came from increasing optimism that the U.S. and China can get a deal done to normalize trade relations affecting billions of dollars of goods flowing around the globe.
The other major leg of support was a FED that has adopted a decidedly dovish stance. One reason the central bank has given for holding off on more rate hikes has been muted inflation.
It was the best first quarter for the S&P 500 since 1998 and the best quarter for the other major averages in over a decade.
What has happened after other big first quarters? Since 1950, when Q1 was up >10% the final 9 months have been higher 9 of 10 times.
Yields tumbled and the dollar surged—these were two of the most crowded trades of 2019 and they continue to be steamrolled. Everyone expected yields to rise and the dollar to soften in relation to other currencies and they have done quite the opposite.
On the economic front, we got the final reading on Q4 GDP and it was revised down from 2.6% to 2.2%. Also, personal income and spending disappointed as well as prices paid.
The Chicago Fed’s index of national economic activity registered at a negative 0.29 in February from an upwardly revised negative 0.25 in January, the central bank branch said Monday. December’s reading was just in positive territory, capping a string of consecutive positive readings from June through the end of last year. Other regional reports that were disappointments were Dallas and Richmond. Bucking the trend in regional FED reports was Kansas City.
Housing rebound hopes were hammered as Starts/Permits plunged In March. Pending home sales were weaker as well, but new home sales were a beat. Markets so worried about a recession that new home sales are rising again.
As we head into April—the Dow has been up the past 14 years in a row and the S&P 500 has been up 13 of the past 14 years. That’s a long streak so we’ll be watching the markets closely.
We will get the latest reading on jobs growth Friday as well as several other data points. The data that was delayed from the government shutdown is starting to unclog so we’ll be keeping a close eye on it, especially as we have so many analysts warning of a slowdown for earnings and economic growth. So, stay tuned and we’ll keep you posted.
Todd Day, MBA
Portfolio Manager
Horizon Financial Services, LLC
April 2, 2019
