NDS Weekly Commentary (4/29/2019) – Economic Growth Surpasses Expectations

April 29, 2019

1Q GDP surprised investors on the upside last week – growing at an annualized quarterly rate of 3.2% and surpassing consensus estimates of 2.3%. The strong reading was the result of an increase in net exports and inventories of 1.0% and 0.7%, respectively. However, final sales to domestic purchasers grew by only 1.4%. Chances are that exports and inventories will grow more slowly in the 2nd quarter cutting GDP growth to about 2%. Economists expect consumer spending to pick up this spring as retail sales were strong in March. The unemployment rate remains low, wages are rising and consumer sentiment remains strong so economic growth should continue. The most recent GDP report certainly alleviated any recession fears in the short-term.

U.S. markets responded positively for the week with S&P 500 and the NASDAQ up 1.2% and 1.9%, respectively. The best performing sectors last week were health care (+3.7%), which has been a laggard, and communications services (+2.7%). The fixed income market was also positive for the week as the rate on the 10yr U.S. Treasury dropped from 2.57% to 2.51%. Globally, equity markets were weak with developed markets off 0.2% and emerging markets down 1.3%. The international outlook seems to be improving as the ECB is providing additional monetary stimulus and Japan recently passed a fiscal stimulus package.

Corporate earnings continue to come in better than expected. So far, almost 80% of companies that have reported have beaten expectations. This week 190 companies of the S&P 500 index are scheduled to report results. In addition, look for economic reports on factory orders, productivity and March jobs that are expected to be 185,000.

β€œHe has achieved success who has worked well, laughed often, and loved much.” – Elbert Hubbard