Markets, Economy

Weekly Kickstart (04/29/2019-05/03/2019)

4/29/19 8:00 AM

iStock-626627280.jpgStocks continued higher last week, as the S&P 500 rose by 1.20 percent to 2,939.88. That left the benchmark index up 17.27 percent 2019-to-date, and 0.31 percent above the all-time closing high hit last September. Indeed, in a span of just 215 days, the S&P 500 went from peaking in September to briefly touching bear market territory in December, and then all the way back to a new record close this month. Perhaps the biggest difference between September and April is that last fall market participants were expecting an additional four quarter-point interest rate hikes from the Federal Reserve in the year ahead, whereas most investors now believe that the next Fed move will instead be a rate cut.

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Another positive for equities in 2019 has been the U.S. economy, which overcame a partial government shutdown, trade policy uncertainty, and a handful of other headwinds to remain well on its way to soon becoming the longest expansion in modern history. The resilient economy has also continued to support corporate profit growth, and in turn contributed to yet another string of upside earnings surprises. For example, of the 46 percent of S&P 500-listed companies that already reported their Q1 results, 77 percent have beat their average earnings per share estimate, according to FactSet. That is well above the 5-year average and in aggregate, companies are reporting earnings that are 5.3 percent above forecasts, also above the 5-year average. Despite these encouraging developments, there are lots of unknowns (risks) left for the market to overcome in the near-term, all of which could become excuses for traders to take profits (sell) after such a sharp move higher in stock prices. Any retail investors unsure how to navigate this potentially volatile environment should consider consulting with a professional financial advisor and as always, we are here to help with any questions 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 new home sales jumped, housing inflation cooled, demand for U.S.-manufactured durable goods rebounded, gross domestic product (GDP) growth during the first quarter of 2019 strengthened, and core capital expenditures, an important business investment proxy, improved. As for the negatives, mortgage applications fell, existing home sales disappointed forecasts, gauges of regional manufacturing activity deteriorated, and first-time claims for unemployment benefits surged, although this could be related to Easter holiday volatility. This week the pace of economic data picks up with several important reports on construction, consumers, productivity, inflation, and employment scheduled to be released. That includes the big April job report from the U.S. Department of Labor due out on Friday, as well as a potentially market-moving announcement on monetary policy from the FOMC on Wednesday.

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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, FactSet, Twitter, FRBSL

Post author: Charles Couch

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