Please note: there will be no market commentary next week. Thank you.
Stocks turned in a solid week. Through the Friday close, the Dow rose 0.9%, the S&P was up 1.2%, and the Nasdaq returned 1.4%. Bond prices fell as yields rose. Gold was higher again, up 0.4%. Oil was up, too, climbing 1.9% to $68.98 per barrel. The international Brent oil, which is used for much of the gas here on the east coast, added $1 to close at $78.10.
Stocks turned in a solid week. Through the Friday close, the Dow rose 0.9%, the S&P was up 1.2%, and the Nasdaq returned 1.4%. Bond prices fell as yields rose. Gold was higher again, up 0.4%. Oil was up, too, climbing 1.9% to $68.98 per barrel. The international Brent oil, which is used for much of the gas here on the east coast, added $1 to close at $78.10.
There weren’t a lot of market-moving headlines this week. Economic data was the main focus as a handful of economic reports were released.
News on trade also impacted the market – but to the upside for a change. The rhetoric seemed to soften as it was reported that the U.S. reached out to China for more talks to resolve the trade dispute. There is the hope that something can be worked out before a new round of tariffs on $200 billion of Chinese imports are implemented.
However, a late-week comment from President Trump indicated he still was looking to implement that $200 billion tariff, which caused stocks to fall.
As for economic data, the results were mostly positive, though there is a lot of data to sift through.
We’ll start with a report on employment, call the Jolts report (which stands for job openings and labor turnover). The jolts report continues to show the amount of job openings are above the amount of people unemployed. This is a very positive sign.
News on trade also impacted the market – but to the upside for a change. The rhetoric seemed to soften as it was reported that the U.S. reached out to China for more talks to resolve the trade dispute. There is the hope that something can be worked out before a new round of tariffs on $200 billion of Chinese imports are implemented.
However, a late-week comment from President Trump indicated he still was looking to implement that $200 billion tariff, which caused stocks to fall.
As for economic data, the results were mostly positive, though there is a lot of data to sift through.
We’ll start with a report on employment, call the Jolts report (which stands for job openings and labor turnover). The jolts report continues to show the amount of job openings are above the amount of people unemployed. This is a very positive sign.
In another positive report, small business optimism hit its highest level – ever.
These small businesses are reporting better sales, hiring, and investment and attributing it to the tax cuts and deregulation coming from Washington.
In other reports, census figures out this week showed incomes rising and the poverty level hit its lowest level since 2006. Industrial production last month looked solid, too.
On the negative side, the Fed’s Beige Book report – which gives an anecdotal look at the strength of the economy – continued to show positive growth, but the tariff and trade fights are starting to take their toll. Also, retail sales grew only slightly last month, at its lowest level in six months.
In the last bit of economic data, we’ll take a look at inflation. It took a turn lower last month but as you can see in the chart below, it is still on the high side.
On the negative side, the Fed’s Beige Book report – which gives an anecdotal look at the strength of the economy – continued to show positive growth, but the tariff and trade fights are starting to take their toll. Also, retail sales grew only slightly last month, at its lowest level in six months.
In the last bit of economic data, we’ll take a look at inflation. It took a turn lower last month but as you can see in the chart below, it is still on the high side.
The lower inflation print has some investors thinking the Fed will not pull back on their stimulus program as much as originally expected. However, the overall economic picture remains solid and the odds of them raising interest rates further continues to climb.
Another sign that the economy is on healthy footing is the record high level in the Dow Transportation Index (often referred to as the ‘transports’). This is an index of 20 large transportation-related companies like CSX or UPS that are involved in commerce in the country. The index tends to rise when commerce is strong and fall on the opposite.
As you can see by the record high in the chart below, commerce still looks strong.
As you can see by the record high in the chart below, commerce still looks strong.
Next Week
Next week will be pretty quiet. There will be a few economic reports on housing and little else. With the lack of data, attention is likely to shift to trade and is likely to add to the volatility.
Investment Strategy
No change here. Markets took a nice turn higher this week, but from a short term perspective, we don’t think they are at a level to be sold. Nor would we be actively buying the broader market at this point. Individual stocks look like a better play for new money here.
There is no change in our longer term forecast, either, which remains difficult to predict. Fundamentals are still very good with pro-business policies out of Washington providing a solid tailwind. However, rising interest rates have historically pulled markets lower. It’s tough to say where we think the market will go the long run.
Bonds are also volatile at this time. Yields have risen recently (and prices have fallen), but we don’t think prices will fall much further and continue to trade in the range they have been in for the last several months.
As for the rest of the portfolio, bonds to protect against inflation, or TIPs, remain a good long term hedge for inflation. Floating-rate bonds will do well if interest rates do rise.
Some municipal bonds look attractive for the right client, too. We like buying individual, insured names for these bonds, avoiding muni index bonds if possible. We keep a longer term focus with these investments.
Gold is another good hedge for the portfolio. It is only a hedge at this point – rising on geopolitical issues as a flight to safety.
Finally, in international stocks, we prefer developed markets to emerging ones at this time.
This commentary is for informational purposes and is not investment advice, an indicator of future performance, a solicitation, an offer to buy or sell, or a recommendation for any security. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing. Past performance cannot guarantee results.
Next week will be pretty quiet. There will be a few economic reports on housing and little else. With the lack of data, attention is likely to shift to trade and is likely to add to the volatility.
Investment Strategy
No change here. Markets took a nice turn higher this week, but from a short term perspective, we don’t think they are at a level to be sold. Nor would we be actively buying the broader market at this point. Individual stocks look like a better play for new money here.
There is no change in our longer term forecast, either, which remains difficult to predict. Fundamentals are still very good with pro-business policies out of Washington providing a solid tailwind. However, rising interest rates have historically pulled markets lower. It’s tough to say where we think the market will go the long run.
Bonds are also volatile at this time. Yields have risen recently (and prices have fallen), but we don’t think prices will fall much further and continue to trade in the range they have been in for the last several months.
As for the rest of the portfolio, bonds to protect against inflation, or TIPs, remain a good long term hedge for inflation. Floating-rate bonds will do well if interest rates do rise.
Some municipal bonds look attractive for the right client, too. We like buying individual, insured names for these bonds, avoiding muni index bonds if possible. We keep a longer term focus with these investments.
Gold is another good hedge for the portfolio. It is only a hedge at this point – rising on geopolitical issues as a flight to safety.
Finally, in international stocks, we prefer developed markets to emerging ones at this time.
This commentary is for informational purposes and is not investment advice, an indicator of future performance, a solicitation, an offer to buy or sell, or a recommendation for any security. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing. Past performance cannot guarantee results.
