Markets, Economy

Weekly Kickstart (03/04/2019-03/08/2019)

3/4/19 8:00 AM

iStock-626627280.jpgStocks continued higher last week, as the S&P 500 rose by 0.39 percent to 2,803.69. That left the benchmark index up 11.84 percent 2019-to-date, and just 4.34 percent below the all-time closing high hit last September. However, with a lot of uncertainty still surrounding the trade negotiations with China and various other potential headwinds, some pullback in the market would not be too surprising following this roughly 20 percent, V-shaped bounce off of the December lows. Perhaps more important, though, is that even after the big rebound in equity valuations, the medium-term prospects for stocks remain favorable. For example, the Dow Jones Industrial Average (DJIA) prior to last week’s fractional decline had experienced nine consecutive weekly gains. Such a pattern has occurred more than a dozen times in the past 120 years and not once coincided with a major market top.

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Similarly, every time in the past when the NASDAQ had risen for nine weeks in a row it closed higher at some point during the following three months. The S&P 500 is the one major index in the current run-up that has not risen for nine straight weeks, but it did post a solid gain in both January and February. In the 27 post-WWII occurrences of the S&P 500 rallying during the first two months of a year it continued higher into yearend 93 percent of the time. Other positive signs for equities include that breadth has been very strong during the Q1 rebound and volatility has generally trended lower, two things typically not seen during a “bear market bounce.” Of course past performance does not necessarily predict future results but given the potential for some consolidation or even retracement in the near-term, such statistics should be encouraging. Additional assistance navigating the current market environment is available by consulting with a professional financial advisor and as always, we are here to help with any question you may have.

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To recap a few of the things we learned about the economy last week, the positives included that the 30-year mortgage rate held near a 1-year low, home purchase applications increased, building authorizations rose, pending home sales improved, housing inflation moderated, income growth firmed, consumer confidence jumped, and U.S. gross domestic product (GDP) during the fourth quarter of 2018 expanded by more than forecast. As for the negatives, the nation’s trade deficit (in goods) widened, housing starts plunged, gauges of both national and regional manufacturing activity continued to send mixed signals, consumer spending declined, and the number of Americans making first-time claims for unemployment benefits increased. This week the pace of economic data picks up slightly with a few important reports on construction, real estate, services sector activity, productivity, and employment scheduled to be released, including the potentially market-moving February job report from the Bureau of Labor Statistics (BLS) due out on Friday.

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**A more detailed snapshot of the U.S. economy can be found here.**

What To Watch:

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Sources: Econoday, Twitter, The Fat Pitch, FRBSL

Post author: Charles Couch

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