Archive for ND&S Updates
ND&S Weekly Commentary 2.19.19 – Crisis Averted
February 19, 2019
The equity markets’ resilience continued last week as trade progress with China and a government-spending bill that averted another shutdown provided the lift. For the week, the DJIA jumped higher by 3.21% while the broader-based S&P 500 closed up 2.56%. Smaller US companies continued their surge closing the week up 4.22%. However, international equities were mixed with the MSCI EAFE up 2.04% and emerging markets down 0.49%. Yields pushed higher on the week with the 10yr US Treasury yield settling at 2.66%, up 3bps from the previous week.
With roughly two weeks remaining in the US-imposed 90-day negotiating window with China, media suggested that President Trump is considering extending the deadline for another 60 days as progress is being made. There are plenty of thorny issues still to be ironed out, but optimism over a potential deal helped support markets last week. Additionally, congressional negotiators cobbled together a spending package to fund the government through the end of the fiscal year. The agreement did include some funding for barriers, but much less than the White House requested. No doubt this removed some uncertainty in the short-term.
With roughly 80% of the constituents of the S&P 500 Index having reported for Q4 2018, forecasted earnings growth is running at a 13.1% year-over-year pace while revenues are seen rising 7% compared with the same quarter a year ago, according to FactSet Research. However, estimates for Q1 continue to be lowered with analysts now expecting earnings per share to decline around 2.5% this quarter. There is plenty of talk in the financial media about the potential “earnings recession” but that doesn’t necessarily mean equities will be negative in that environment. We are monitoring this closely as the bar has been set low with potential upside surprises looming.
In the week ahead, the minutes of January’s FOMC meeting will be released as well as economic reports on durable goods order and existing home sales. Let’s make it another good week!
“In preparing for battle I have always found that plans are useless, but planning is indispensable.” – Dwight D. Eisenhower
Weekly Commentary (02/11/19) – A Mixed Bag: Will February Make Us Shiver?
February 11, 2019
Markets were mixed last week as heightened global growth concerns dominated the headlines. Fed Chairman Jerome Powell reiterated that the Fed would remain ‘patient’ … excellent news for investors.
For the week, the DJIA gained 0.32% while the S&P 500 tacked-on 0.11%. The volatile NASDAQ advanced 0.53%. Developed international markets retreated as the MSCI EAFE index dropped 1.38% for the week. Emerging markets also lost ground as the MSCI EM index declined 1.34%. Small company stocks, represented by the Russell 2000, finished 0.32% for the week. Fixed income, represented by the Bloomberg/Barclays Aggregate, finished the week slightly higher (+0.38%) in a quiet week for bonds. As a result, the 10 YR US Treasury closed at a yield of 2.63% (down 7 bps from the previous week’s closing yield of 2.70%). Gold prices closed at $1,313.70/oz – down 0.24% on the week. Oil prices sold off as oil closed at $52.72 – lower by 4.60% on the week.
February is off to a reasonable start, but will February make us shiver? It all depends on a few key events. The weeks ahead will be filled with uncertainty in the run-up to the important March 1 trade deadline with China that could see trade tariffs increase from 10% to 25%. Rhetoric out of the White House will likely downplay the event, but investors know that a deal with China is crucial for further gains in worldwide markets. Not to be forgotten, a potential second government shutdown still looms. Let’s hope that Congress and the president can find a reasonable path forward.
In the meantime, Newman Dignan & Sheerar, Inc. does not plan to add to risk assets in any meaningful way until the drama in Washington subsides.
“But February made me shiver
With every paper I’d deliver
Bad news on the doorstep
I couldn’t take one more step”
– Don McLean
Weekly Commentary 02.25.2019 – A Home Run or Ball 4
February 25, 2019
With baseball season starting it’s only fitting that the market closed on Friday with a “ninth” straight week of gains. Federal Reserve concerns were calmed by the release of their “dovish” January meeting minutes. There were positive trade resolutions with China, and fourth quarter earnings season has been better than the “bears” expected.
The shortened President’s Day week was fairly positive for equity markets. The DOW industrials and the S&P 500 rose 0.6% and the tech heavy Nasdaq advanced 0.74%. The Russell 2000 was the winner increasing 1.27%. The best performing sectors were Utilities 2.4%, Basic Materials 2.4%, and Tech 1.4%.
China’s leaders and President Trump along with his key negotiators, met and cited progress from the latest round of talks. President Trump said he would be willing to extend the March 1st new tariff deadline and the delegation will remain in Washington a few more days to continue negotiations. The global markets reacted favorably with Developed equity markets advancing 1.5% and Emerging increasing 2.7% for the week.
The Federal Reserve, disclosed in minutes of their Jan. 29-30 meeting, confirmed earlier statements that they are willing to be patient in raising rates and flexible in shrinking its balance sheet. US Treasuries rallied with the yield on the 10 year dropping 4bps to 2.65%.
Another driver of the week’s gains was better than expected corporate earnings and revenues. Thus far 89% of the companies in the S&P 500 have reported fourth quarter results, 69% of S&P 500 companies reported a positive EPS surprise and 61% reported a positive revenue surprise. The forward 12-month price to earnings ratio for the S&P 500 is now 16.2 which is in line with the five year average of 16.4.
Along with trade talks and Washington political haggling there will be a slew of important economic data released this week. On Wednesday housing starts, Thursday fourth-quarter GDP and on Friday ISM manufacturing, consumer confidence, and auto sales will be reported.
Though the drivers of the markets were in place last week, we continue to have our eyes on the strength of the US and global economies going forward. We recommend staying diversified and take advantage of a potential market sell-off, favoring dividend growth to help mitigate volaltility.
“Baseball is 90% mental and the other half is physical.”–Yoga Berra