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Market Pausing, But Average Stock Outperforming

by Fortem Financial February 11, 2019

While the market has paused over recent days, the equally-weighted S&P has continued to outperform and reflects an improvement for the “average stock.”  The equity markets started last week on a positive note before retreating as trade concerns and Brexit dampened investor enthusiasm.  The major indices rose fractionally: the Nasdaq gained 0.55%, followed by the Russell 2000® Index (0.29%), the Dow Jones Industrial Average (0.17%) and the S&P 500® Index (0.05%.)  Trade concerns took center stage as the European Commission lowered its 2019 growth forecast for the euro zone from 1.9% to 1.3%; the announcement noted a drop in exports to China along with a lack of progress in trade negotiations since the region agreed last summer to a trade truce with the U.S.  Uncertainties include the potential for the U.S. to impose additional tariffs next month, and the upcoming Brexit date in late March.  U.S. trade negotiators are scheduled to resume discussions this week in China.  Comments suggest that a trade deal is a “pretty sizable distance” away; as a result, President Trump has delayed his meeting with President Xi until after the self-imposed early March deadline.  Investors reacted negatively as fears that additional tariffs scheduled to take effect on March 1 might not be delayed pending an agreement.

Companies are deferring investments and becoming ever more cautious as the March 29 Brexit deadline nears.  Each of the four scenarios we previously mentioned remains possible: the UK parliament could vote to cancel its “leave” decision and remain a member of the EU; the UK could extend the deadline and/or issue another referendum; or the EU members could vote to delay to process.  A luxury auto dealer with a major presence in the UK recently indicated that consumer demand remains strong even in the absence of a clear path forward.  Each of these global trade issues may well come down to eleventh hour resolutions as negotiators seek the most favorable outcomes for their side.

So far, with earnings results from 66% of companies in the S&P 500®, the earnings growth rate of 13.3% suggests a fifth consecutive quarter of double-digit growth.  Notably, companies with less than 50% of their sales originating outside the U.S. are reporting twice the earnings growth compared to multi-national firms.  Transportation stocks (including trucking, rail and marine), have reported solid results with trends for 2019 remaining favorable; the sector is recognized as a leading indicator of economic growth. In earnings conference calls, many executives convey a positive-yet-cautious message due to the uncertainties related to trade and Brexit; they are increasingly outspoken in urging the U.S., Europe and China to finalize trade agreements sooner rather than later.

Market focus will soon shift from earnings reports to economic data and geopolitical events, especially Congressional action to avoid another government shutdown which could take effect on February 15th.  These uncertainties may cause continued market volatility and may disrupt the recovery from December lows; and yet, the level of investor concern over these issues may pressure international leaders to find resolutions.

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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