Archive for ND&S Updates

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

January 14, 2019 

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!

“Talent sets the floor, character sets the ceiling.” – Bill Belichick

ND&S Weekly Commentary 1/7/19 – Strong Jobs Report Eases Growth Concerns

January 7, 2019 

Equity markets continued their volatile ways last week. On Thursday, the DJIA fell over 600 points on news from Apple that 4th quarter iPhone sales in China were below estimates. This marked the first negative sales revision for Apple in 15 years. Then on Friday, the DJIA soared over 700 points, recovering all of the previous day’s decline, as a blowout jobs report and comments from Fed Chairman Jerome Powell that the FOMC would be patient on future rate increases. Friday’s advance pushed equities into positive territory for the week with the DJIA, S&P 500 and NASDAQ up 1.7%, 1.9% and 2.8%, respectively. International equities were also positive with the MSCI EAFE increasing 1.4% and the MSCI EM advancing a modest 0.3% on the week.

The jobs report on Friday came in well above expectations with an increase of 312,000 jobs in December, with an additional 58,000 from upward revisions to prior months. Notably, the unemployment rate did rise to 3.9%, pushed up by over 400,000 workers entering the labor force last month. This moved the labor participation rate up to 63.1% from 62.9%. Perhaps, the best part of Friday’s report was that wages showed a healthy gain of 0.4% in December and are now up 3.2% from a year ago. Gains in payrolls, more workers joining the labor force and higher real wages should support additional consumer spending and bolster somewhat slower but stable economic growth in 2019.

Interest rates fell last week as the rate on the 10 year U.S. Treasury dropped from 2.72% to 2.67% further flattening the yield curve. This week, look for economic reports on ISM non-mfg. PMI, inflation and the release of FOMC minutes from last month. In addition, US-China trade talks would resume this week at the vice-ministerial level.

“Without investment there will not be growth, and without growth there will not be employment.” -Muhtar Kent