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