The S&P 500's performance for the first quarter is its best quarterly gain since Q3 of 2009 and its finest start to the year since 1998. The quarter certainly benefited from an oversold bounce back after the fourth quarter's heavy 14% slump, but analysts still see a positive period ahead. While there could be some bumps in Q2 as the market struggles with earnings growth and a slower economy, positive U.S. China trade relations and investing sentiment could propel stocks higher.
The last day of the quarter celebrated the much anticipated Lyft IPO. For the week, the Russell 2000® led all indices with a gain of 2.25% followed by the Dow Jones Industrial Average (1.67%), S&P 500® (1.20%) and the Nasdaq (1.13%). Prior to the Friday IPO, Lyft raised the offering price from the mid-60s to $72; the stock then closed up 8.74% for the day. Some believe the IPO will start a new technology wave as Uber and Pinterest are among several companies planning upcoming IPOs. The open issue is whether or not these companies transition to profitability.
The markets seemed encouraged by the resumption of trade discussions in China; equity markets in Asia finished with their best quarterly results since 2016. Even as the U.S. and China appear committed to reach a trade agreement, both countries acknowledge the slow pace of negotiations; and, the lack of details provides little on which to gauge any progress. And yet, the recent increase in prices for pork and other commodities confirms that China is purchasing increased quantities of goods from the U.S. In Europe, the future of Brexit remains unknown; Prime Minister May’s latest attempt at Parliamentary approval for her withdrawal agreement failed; also, non-binding “indicative” votes on several alternatives each failed to gain a majority. Parliament will consider more indicative voting next week; then, on April 10, the EU holds an emergency summit, and April 12 would be the new Brexit day if the UK does not seek and/or the EU does not grant a further delay.
First quarter economic data were mixed; some now suggest that the Federal Reserve should cut rates to support economic growth. Larry Kudlow, National Economic Council Director, suggested an immediate half percent rate cut to protect economic expansion. Dallas Fed President Kaplan responded by saying that first quarter data “are going to be a little bit noisy” as there were “lots of odd things going on.” However, a rate cut would not address the biggest economic concern which is the uncertainty for both consumers and businesses related to the trade disputes.
Several companies have preannounced negative, or positive, earning variances. Earnings season begins during the second week in April; results will provide more insight into the strength of the economy and outlook for the remainder of the year. Recent trading activity, including light volumes and modest volatility, suggests that many investors are in a holding pattern perhaps awaiting some sort of market catalyst; and still, the market’s upside momentum continues.
Source: Pacific Global Investment Management Company
Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.
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