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Weekly Commentary

ND&S Weekly Commentary (1.14.19) – A Solid Rebound

Markets rebounded solidly last week as positive comments from the Fed, strong economic data and increased optimism surrounding a trade deal with China buoyed investors’ spirits.

For the week, the DJIA gained 2.4% while the S&P 500 tacked-on 2.6%. The volatile NASDAQ jumped 3.5%. Developed international markets were also higher as the MSCI EAFE index increased 2.9% for the week. Emerging markets rebounded nicely as the MSCI EM index leapt 3.8%. Small company stocks, represented by the Russell 2000, surged 4.8% last week after being beaten-down last year. Fixed income, represented by the Bloomberg/Barclays Aggregate, finished the week slightly lower (-0.04%) in a quiet week for bonds. As a result, the 10 YR US Treasury closed at a yield of 2.71% (up 4 bps from the previous week’s closing yield of 2.67%). Gold prices closed at $1,287.10/oz – up 0.34% on the week. Oil prices continued their rebound as oil closed at $51.59 – higher by 7.57% on the week.

The week ahead will bring a host of economic reports – housing starts and existing home sales, retail sales, industrial production and producer prices. We expect most economic reports to be fairly positive, but investors will be focusing on the Brexit vote on Tuesday. Fourth-quarter earnings will kick off this week with bank earnings in the headlines as Citigroup reports on Monday followed by other money center banks later in the week. We expect a fair amount of volatility around company earnings over the next few weeks as the impact of trade tariffs (real and potential) will likely be felt. Of course, any developments regarding the lingering government shutdown and the trade spat with China will provide lots of drama this week.

The recent rebound in the markets is certainly a welcome start to the new year. Is the rebound simply reflexive or is it sustainable? We expect a decent year in the markets for 2019 with no signs of a recession. The year-end sell-off resulted in valuations that are decently lower than their 25-year averages. Inflation seems to be mild while employment is strong and consumer confidence is healthy … a good combination for a moderate rebound in 2019. The road ahead, however, will be a bit bumpy (as usual) … so buckle-up.

Go Pats!

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