/perspectives/weekly-viewpoint/a-pause-to-refresh-2019

A Pause to Refresh

The major market indices finished the week little changed as buyers fatigue set in following the sharp rally off the December 24 lows.

February 11, 2019    |    By Mike Schwager

Performance for Week Ending 2/8/2019:

The Dow Jones Industrial Average (Dow) added 0.17%, the Wilshire 5000 Total Market IndexSM (Wilshire 5000SM) gained 0.11%, the Standard & Poor’s 500 Index (S&P 500) rose by 0.05% and the Nasdaq Composite Index (NASDAQ) tacked on 0.47%. Sector breadth was mixed with 5 of the S&P sector groups finishing higher and 6 closing lower. The Utilities sector (+2.0%) was the best performer while Energy (-3.25%) was the worst.

Index* Closing Price 2/8/2019 Percentage Change for Week Ending 2/8/2019 Year-to-Date Percentage Change Through 2/8/2019
Dow 25106.33 +0.17% +7.63%
Wilshire 5000 28056.24 +0.11% +8.96%
S&P 500 2707.88 +0.05% +8.02%
NASDAQ 7298.20 +0.47% +9.99%

*See below for Index Definitions

 
MARKET OBSERVATIONS: 2/4/2019 – 2/8/2019

The major market indices finished the week little changed as buyers fatigue set in following the sharp rally off the December 24 lows. The S&P 500 has now gained over 15% in the just under 8-week period. The rapid ascent over such a short period of time has left the market in an overbought position and a period of consolidation should be viewed as a healthy development (a so-called ‘pause to refresh’).

Trade Concerns: With earnings season coming to an end, the focus is beginning to shift back to the macro front, with the trade spat between the US and China moving to the front burner. Stoking concerns were comments from President Trump stating that he and Chinese President Xi Jinping will not meet before their March 1 self-imposed deadline for a trade deal. The announcement was viewed as a sign that recent negotiations have not yielded much progress. On a positive note, talks are scheduled to resume during the coming week with U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer leading a delegation of officials to Beijing for the next round of negotiations.

Q4 Earnings Tracker: Through Friday, 333 members of the S&P 500 have released results with just over 72% surprising to the upside. Aggregate earnings growth is running at 14.3%, modestly above the 13.3% forecasted growth and on track for the fifth consecutive quarter of double-digit growth. While the pace of growth has moderated from recent quarters, it still remains solidly in positive territory and certainly better than feared heading into the quarter.

Outlook: We maintain a bullish tilt towards the market and continue to believe there is money to be made over the coming quarters. However, after the strong start to the year and overbought conditions, additional near-term market consolidation would not be surprising. Our view is that as long as the economy and earnings continue to grow – which remains our base-case scenario—equity prices should ultimately follow suit. Valuations have contracted following last year’s drawdown, and with stabilizing interest rates and inflation, a moderate expansion in the market’s price to earnings multiple seems likely.

The Week Ahead: While we have moved past the peak in Q4 earnings reports, this week we will see results from just over 60 members of the S&P 500. The data calendar will be backend loaded with the bulk of the reports due out on Friday. Economic reports of interest include; the December JOLTS report, the January consumer price index (CPI), the January producer price index (PPI), January retail sales, November business inventories, the February Empire State manufacturing survey, January industrial production and capacity utilization and the University of Michigan’s February consumer sentiment survey. The Fed speaking calendar will be busy with nine appearances on the docket, including Fed Chairman Powell on Tuesday afternoon.

Definitions

The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally defined as the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.

Wilshire 5000 Total Market IndexSM represents the broadest index for the U.S. equity market, measuring the performance of all U.S. equity securities with readily available price data. The index is comprised of virtually every stock that: the firm's headquarters are based in the U.S.; the stock is actively traded on a U.S. exchange; the stock has widely available pricing information (this disqualifies bulletin board, or over-the-counter stocks). The index is market cap weighted, meaning that the firms with the highest market value account for a larger portion of the index.

Standard and Poor's 500© Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.

This material contains opinions of the author, but not necessarily those of Guggenheim Partners, LLC or its subsidiaries. The opinions contained herein are subject to change without notice. Forward looking statements, estimates, and certain information contained herein are based upon proprietary and non-proprietary research and other sources. Information contained herein has been obtained from sources believed to be reliable, but are not assured as to accuracy. Past performance is not indicative of future results. There is neither representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information. No part of this material may be reproduced or referred to in any form, without express written permission of Guggenheim Partners, LLC.


FEATURED PERSPECTIVES

May 23, 2019

U.S.-China Trade War: The New Long March

Beijing is preparing for a protracted standoff as the U.S.-China trade war ramps up.

May 17, 2019

Quantifying the Credit Risk and Default Runway

After the recession starts, high-yield bond and bank loan issuers have at least a 12-month runway before we experience a large wave of defaults.

April 29, 2019

The Next Step for the Fed Could Be a Hike

Signs of economic strength suggest the market is wrong to price in a rate cut.


VIDEO

Forecating the Next Recession 

Forecating the Next Recession

Global CIO Scott Minerd and Head of Macroeconomic and Investment Research Brian Smedley provide context and commentary to complement our recent publication, “Forecasting the Next Recession.”

Macro Themes to Watch in 2018 

Macro Themes to Watch in 2018

In his market outlook, Global CIO Scott Minerd discusses the challenges of managing in a market melt up and highlights several charts from his recent piece, “10 Macro Themes to Watch in 2018.”







Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objective, risks charges, expenses and the other information, which should be considered carefully before investing. To obtain a prospectus and summary prospectus (if available) click here or call 800.820.0888.

Investing involves risk, including the possible loss of principal.

Guggenheim Investments represents the following affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Funds Distributors, LLC, GS GAMMA Advisors, LLC, Guggenheim Partners Europe Limited and Guggenheim Partners India Management. Securities offered through Guggenheim Funds Distributors, LLC, an affiliate of Guggenheim, SI, GFIA and GPIM.

© Guggenheim Investments. All rights reserved.

Research our firm with FINRA Broker Check.

• Not FDIC Insured • No Bank Guarantee • May Lose Value

This website is directed to and intended for use by citizens or residents of the United States of America only. The material provided on this website is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation. Investing involves risk, including the possible loss of principal.