- On April 1, 2019
- economics, Economy, investment, Investments, market, market update, NASDAQ, S&P, Stock Market, stocks, Wall Street
Cornerstone’s Week on Wall Street
Last week was largely positive for U.S. equity markets led by Small-cap stocks. The Russell 2000 rallied 2.3%, followed by the Dow Jones Industrial Average up 1.7%, and the S&P 500 up 1.2%. Industrial, Material, and Consumer Discretionary stocks led, while Utilities, Communications, and Tech stocks were laggards. International markets did not follow suit, both developed and emerging markets were flat. Yields ticked higher with the benchmark 10-Year U.S. Treasury yield up to 2.5%, while Commodities fell as the Dollar rallied. For the quarter, the S&P 500 gained over 13% and rallied over 22% since the December lows, to cap off the strongest quarter for the market since 2009, and the best start to a year since 1998.1 International and Emerging market stocks were also positive by roughly 10% during the First quarter.
As we end the First quarter, we have a mixed outlook for the global economy and mixed signals from the stock and bond markets. Fourth quarter GDP was revised downward to 2.2%, ending the streak of consecutive quarter over quarter expansion at 9, the longest run ever. Global readings of the Purchasing Manager’s Index (PMI) largely continue to trend downward, and retail sales here in the U.S. also down from the peak. In fixed income markets, the recent inversion of the 10-year/3-month segment of the curve could be an ominous signal, and the fact that yields remain low in the wake of the equity market rally signals that the bond market does not yet believe in a growth rebound.
On the other hand, the torrid rally in equity markets off the December lows signals that investors see the current slowdown as a temporary soft-patch. Consumer confidence remains solid and improved last month. Trade talks between the U.S. and China appear to be progressing nicely, the conclusion of the Mueller investigation removes some political uncertainty, and most importantly the Fed signaled yet again that it has the market’s back.
What does this mean for our outlook and portfolios? We continue to pound the table on balance. Now is not the time to throw caution to the wind and to chase markets higher. We favor a mixture of both offense and defense, continue to proactively invest where opportunities present themselves and maintain allocations to defensive areas of the market. We will update our outlook and
positioning in more detail in the upcoming Cornerstone’s View from the Investment Desk in the coming weeks.
The first week of April will be relatively quiet on Wall Street. On the economic news front, the focus will be on PMI data, from China, the EU, and the U.S. throughout the week. We will also get updates on non-manufacturing numbers Wednesday. The monthly U.S. jobs report will be released on Friday, and Retail Sales figures released Tuesday. There are a handful of companies reporting earnings which include: Constellation Brands (STZ), Walgreen’s Boot’s Alliance (WBA), Gamestop (GME), and Signet Jeweler’s (SIG).