Performance for Week Ending 3/1/2019:
The Dow Jones Industrial Average (Dow) dipped 0.02%, the Wilshire 5000 Total Market IndexSM (Wilshire 5000SM) gained 0.40%, the Standard & Poor’s 500 Index (S&P 500) rose by 0.39% and the Nasdaq Composite Index (NASDAQ) tacked on 0.90%. Sector breadth was positive with 7 of the 11 S&P sector groups finishing higher. The Energy sector (+1.08%) was the best performer followed by Technology (+0.98%) and Financials (+0.80%).
||Closing Price 3/1/2019
||Percentage Change for Week Ending 3/1/2019
||Year-to-Date Percentage Change Through 3/1/2019
*See below for Index Definitions
MARKET OBSERVATIONS: 2/25/2019 – 3/1/2019
The major market indices finished the week mixed to mostly higher with the Nasdaq Composite extending its winning streak to 10 consecutive weeks. Trading was choppy throughout the week as investors toggled between favorable macro developments and negative news flow. On the positive side; China’s economy has begun to show signs of stabilization, the US/China trade talks continued to move in the right direction, the US economy grew at a better-than feared pace during the fourth quarter, and the Federal Reserve underscored that it will remain patient with future rate hikes.
On the flipside; geopolitical tensions between India and Pakistan heated up, the meeting between President Trump and North Korea’s Kim Jong Un in Vietnam ended abruptly with no deal reached, global manufacturing surveys continued to signal softness, and political vitriol in Washington remained elevated. While most of these issues have little direct impact on the markets, they certainly have the ability to dent investor sentiment and keep nervous investors out of the market.
Through the end of February, the S&P 500 gained 11.1 percent, the best start to the year since 1991. All eleven of the S&P sector groups are solidly in positive territory with Industrials, Technology, and Energy leading the way. According to research from Dow Jones, when both January and February start the year with positive performance, the remainder the year historically has been positive. The research firm points out that since 1938, there's been 30 years where both January and February have been positive and 29 of those 30 the market finished the year in positive territory.
Trade Developments: Trade talks between the US & China continue to move in the right direction. Late last week, White House economic advisor Larry Kudlow told the media that there was "fantastic" progress in trade talks, thanks in part to U.S. Trade Representative Robert Lighthizer reading "the riot act" to Chinese officials. "We are heading towards a remarkable, historic deal," Kudlow predicted. Treasury Secretary Steven Mnuchin added that the two nations are working on a 150-page document that would turn into a “very detailed agreement,” though he cautioned that “we still have more work to do.”
Still ‘Dovish’: During Fed Chairman Powell's semiannual testimony to Congress last week he reiterated to lawmakers that he was in "no rush to make a judgment" given the mixed data points in the world's biggest economy. Powell said the "baseline outlook is a good one" but cautioned on moderating growth in major economies around the world. Powell added that inflation pressures remain “muted” and the Fed favors balance sheet runoff ending later this year.
Outlook: We maintain a bullish tilt towards the market and continue to believe there is money to be made over the coming quarters. However, the strong start to the year has led to overbought conditions and a period of near-term market consolidation would not be surprising. If the market were to enter into a period of consolidation – we would view it 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: The earnings calendar will be dominated by bellwether retail companies Target and Costco. Joining the two retailers are eight other members of the S&P 500. The focal point of the data calendar will be the February payroll report on Friday. According to Bloomberg, nonfarm payrolls are forecast to rise by 185K while the unemployment rate is expected to dip to 3.9% (from 4.0%). Outside of the jobs reports, reports of interest include; February motor vehicle sales, December construction spending, December new home sales, the February Institute for Supply Management (ISM) non-manufacturing index, and the February ADP employment report. On Wednesday, the Federal Reserve will release its periodic Beige Book report. Five members of the Federal Reserve are scheduled to speak throughout the week, including Fed Chairman Powell on Friday evening.
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.
Guggenheim Investments represents the investment management businesses of Guggenheim Partners, LLC ("Guggenheim"). Guggenheim Funds Distributors, LLC is an affiliate of Guggenheim.
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