Performance for Week Ending 4/5/2019:
The Dow Jones Industrial Average (Dow) gained 1.91%, the Wilshire 5000 Total Market IndexSM (Wilshire 5000SM) added 2.12%, the Standard & Poor’s 500 Index (S&P 500) rose by 2.06% and the Nasdaq Composite Index (NASDAQ) tacked on 2.71%. Sector breadth was positive with 9 of the 11 S&P sector groups finishing higher. The Materials sector (+4.25%) was the best performer followed by Financials (+3.33%) and Consumer Discretionary (+3.23%).
||Closing Price 4/5/2019
||Percentage Change for Week Ending 4/5/2019
||Year-to-Date Percentage Change Through 4/5/2019
*See below for Index Definitions
MARKET OBSERVATIONS: 4/1/2019 – 4/5/2019
The strong upward momentum seen during the first quarter carried over into the new quarter with all of the major market indices posting strong gains. The S&P 500 has now finished higher for seven consecutive sessions. The catalysts for the recent gains included further progress in the trade talks between the US and China, a batch of upbeat US economic data and a rebound in China’s manufacturing sector. The latter was viewed as an inflection point in Chinese growth momentum. With China being the epicenter of global growth, the uptick in economic activity from the world’s second largest economy, should help steady the flagging global economy.
Labor Market Rebounds. The Labor Department reported that nonfarm payrolls rose 196K during the month of March, solidly above the 177K expected by economists and the 118th consecutive month of employment growth. The February data was also revised upward by 13K to 33K. The unemployment rate was unchanged at 3.8%, as expected. Average hourly earnings rose 0.1% during the month and are now up 3.2% on a year/year basis. The more modest than expected wage growth suggests inflation could be even more muted than thought and reinforces a lack of urgency for the Fed to raise interest rates in the near-term. Another sign the labor market remains healthy was the most recent reading on jobless claims. Claims during the week ended March 30 fell 10K to 202K, moderately below the 215K expected by economists and the lowest level in 49 years.
Sentiment: Despite the strong start to the year, the percent of investors who consider themselves ‘bullish’ on the market remains below average. In a survey for the week ended April 4, the American Association of Individual Investors (AAII) showed bullish investors account for only 35% of those polled, mildly below the 38% average dating back to September 1987 and well below the 50%-plus reading that have often foreshadowed a market correction. Investing, in its simplest form, is about emotions – fear & greed. These emotions also tend to be contrarian in nature, meaning investors tend to be the greediest (Bullish) at/near market tops and the most fearful (Bearish) at/near market bottoms. While the current reading is more neutral than a contrarian bullish or bearish signal, it does suggest that the market may have some additional room to run in the near-term.
Outlook: We maintain a bullish tilt towards the market and continue to believe there is money to be made over the coming quarters. While a period of consolidation following the strong year-to-date performance cannot be ruled out, a drawdown would be viewed as healthy as it would likely set the stage for the next leg higher. 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.
The Week Ahead: First-quarter earnings season will kick off in earnest this week with two of the largest banks (JP Morgan & Wells Fargo) reporting on Friday. Four other members of the S&P 500 index will also release results during the week, followed by 48 members during the following week. Inflation figures will be the highlight of the data calendar with the Consumer Price Index (CPI) due out on Wednesday followed by the Producer Price Index (PPI) on Thursday. Other reports of interest include; the February factory orders, the February JOLTS report, March import and export prices and the University of Michigan’s April consumer sentiment survey. The minutes from the March Federal Open Market Committee (FOMC) meeting will be released on Wednesday. The Fed speaking calendar includes six public appearances throughout the week.
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.
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