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Global Economy is slowing but the U.S is still the Belle of the Ball

by Fortem Financial March 25, 2019

The tug-of-war between the bulls and bears continued with mixed economic data and the absence of significant market catalysts.   On Friday, all of the major indices sold off on global growth concerns and ongoing trade tensions.  For the week, the Russell 2000® Index fell 2.67%, followed by the Dow Jones Industrial Average (-1.34%), the S&P 500® Index (-0.77%), and the Nasdaq (-0.60%).  The Federal Reserve provided news headlines on Wednesday: the Fed lowered its 2019 U.S. economic growth outlook from December’s 2.3% estimate to 2.1%; more importantly, the Fed announced a revised projection of no interest rate increases this year, and a sooner-than-anticipated end to its balance sheet runoff program.  The markets’ initial, positive reaction did not last.  Friday’s delayed release of the February existing home sales report showed an 11.8% increase, the largest month-over-month increase since December 2015.  However, the euro zone’s “flash” Purchasing Managers Index (PMI) fell to its lowest level since April 2013; and the U.S. flash PMI fell to a 21-month low.  European Central Bank President Draghi stated that the risk of a recession in Europe is still quite low; the Fed commented on indications of slower consumer and business spending.  Separately, the spread between short and long-term U.S. Treasuries turned negative on Friday for the first time since 2007; the yield on the 10-year U.S. Treasury Note fell below the 3-month T-bill.  The decline in long-term rates directly impacts the profits of lending activity and earnings growth; some consider this “inverted yield curve” an indicator of recession. However, we feel we are a long way away from recession at this time.

U.S. negotiators will travel to China next week to resume face-to-face negotiations the following week.  The rhetoric suggests progress with major hurdles remaining; apparently, both sides desire an agreement but the game of “wait and see” continues.  Meanwhile, Europe faces the uncertainty of Brexit.  On Thursday, the EU granted an extension to May 22 if the United Kingdom Parliament approves the Brexit agreement; if not, the EU will only extend the Brexit deadline to April 12.  The UK, and the Parliament, appear deeply divided; next week’s vote may reveal the future of Brexit.

The IPO market in the U.S. is heating up:  Levi Strauss went public this week; Technology companies Lyft and Uber are planning IPOs over the next few weeks.  These long-awaited IPOs are welcome additions to the equity markets; over the past few years, the number of listed companies has declined due to mergers, private equity transactions and stock buybacks.

Economic data are often widely debated; bulls and bears sometimes interpret the same data to support economic growth or recession. The first quarter GDP will no doubt reflect a slowdown in economic activity.  Companies are now in the “quiet period” before earnings season starts in mid-April.  The recent pattern of lower-than-normal trading volumes continued even during Friday’s selloff; the notable exceptions were stocks in the Financials sector.  Looking ahead, the tug-of-war may lead to heightened volatility in the absence of a market catalyst.

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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Brian Amidei, along with Partners Joseph Romano and Brett D'Orlando have also been named *2014, 2015, 2016, 2017, 2018 Five Star Wealth Managers!

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The Five Star Wealth Manager award is based on 10 eligibility and evaluation criteria: 1) Credentialed as an investment advisory representative (IAR) or a registered investment advisor; 2) Actively employed as a credentialed professional in the financial services industry for a minimum of five years; 3) Favorable regulatory and complaint history review; 4) Fulfilled their firm review based on internal firm standards; 5) Accepting new clients; 6) One-year client retention rate; 7) Five-year client retention rate; 8) Non-institutionalized discretionary and/or non-discretionary client assets administered; 9) Number of client households served; and 10) Educational and professional designations. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or the magazine. The award methodology does not evaluate the quality of services provided. Additional information about this award is available at: fivestarprofessional.com/2016FiveStarWealthManagerMethodology.pdf
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Data Sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market Data: Based on reported data in WSJ Market Data Center (indexes); U.S. Treasury (Treasury Yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness.

Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. The opinions expressed are solely those of the author, and do not represent those of Fortem Financial, LLC or any of its affiliates. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful. Forward looking statements are based on current expectations and assumptions, the economy, and future conditions. As such, forward-looking statements are subject to inherent uncertainty, risks, and changes in circumstance that are difficult to predict. Actual results may differ materially from the anticipated outcomes. Carefully consider investment objectives, risk factors and charges and expenses before investing. Fortem Financial is a registered investment adviser with the SEC. Advisory services are offered through Fortem Financial.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighed index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

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