Week In Brief: March 29

April 5, 2019

Like a teenager's allowance, Q1 came and went. What a quarter it was! Following Q4's equity rout during which the S&P 500 lost 16 percent, Q1 calmed an angst-ridden global investment community. Turning in the best Q1 stock-market performance in a decade.
Equities were revivified by signs that inflationary pressures remained contained. Because lower inflation allows for higher PE multiples. And keeps the Fed at bay. Grounding two birds with one bullish stone. Allowing stocks to rebound from the losses suffered in the final months of 2018.
Moreover, despite downbeat Q1 earnings projections, investors have grown increasingly optimistic following the Fed's cautious shift. After pulling money from U.S. stock mutual and exchange-traded funds at the start of the year, more than $25 billion flowed back in during the week ended March 13, the largest weekly inflow in a year.

Technically, stocks appear inclined to head higher. Having reached the point of last November's "reaction bounce" high -- when the index temporarily lept higher before resuming a precipitous Q4 decline. If the move above that level is successful, the major indices will likely make a run at last September's all-time highs.
It could be tough sledding. As S&P 500 companies project a four percent Q2 profit contraction year over year. Which would represent the index's first quarter of negative earnings growth since 2016. And despite positive fund flows, a potential sign of FOMO (fear of missing out -- which is great for market momentum), investors have yet to completely recover from Q4's pessimism.
Listed among their' recent trepidations was a February drop in orders for long-lasting (durable) factory goods. Following three straight months of growth. A sharp decline in civilian aircraft orders contributed to a 1.6 percent pullback in durable goods orders from January. The decline in commercial aircraft orders was expected since investors knew that Boeing received orders for only five planes last month. Down from 46 the previous month. With the 737 Max accounting for 60 percent of Boeing's orders, that will weigh on durable goods data for a spell.
As for Boeing, the stock drop 15 percent following the second of two crashes over a six-month period. Both of which involved its top-selling 737 Max jet. The stock has recovered 6.4 percent since the March low. As investigators continue looking into the causes behind the crashes in Indonesia and Ethiopia.
So, how'd the Q1 economy hold up?
Recall that the global punditocracy spent much of December and January crowing about how Q1 GDP growth would sink to the 0 - 0.5 percent range. A byproduct of harsh weather and the longest-ever government shutdown.
Today, the analysts at Capital Economics believe that -- since consumption growth was unusually weak -- it's fair to estimate that Q1 GDP growth was a modest 1.5 percent. Of course, given the dour expectations entering 2019, we hardly see how a quarterly print of 1.5 percent could be negatively construed.
Alas, sometimes the peanut gallery simply wants to sing the blues.
The Lyft IPO went off without a hitch. Shares debuted at $72 before rising to $80. A nine percent surge. The stock has drifted lower since. Closing down over 11 percent Monday and falling below its IPO price. Which often occurs and is worth noting if you rank among those investors constantly seeking to jump in on the new hot offering. Many of which can be bought at a discount to the IPO price by patient investors in the weeks following. Amazon and Facebook surrendered 50 percent of their market values before finding their footing and moving higher.
Bespoke Investment Group assembled the following table which shows the performance of the 20 largest tech IPOs since 2001, ranked by market cap.
Research reveals April has been the single best month of the year for stocks over the last two decades. Averaging 2.3 percent gains. Though the second half has been much stronger than the first half (which includes tax day).
In the nation's capital, Attorney General William Barr released a summary of Robert Mueller's long-awaited report last week. Stating that no evidence was found showing that members of the Trump campaign had colluded with Russia to rig the 2016 election. Leaving half the country in a celebratory mood. While disappointing those who'd hoped the special counsel would provide reason to impeach Mr. Trump.
Trump's opponents have demanded that Barr release the entire report. Which the AG has agreed to do. After redacting the identities of all innocent bystanders who happened to be swept up in the minutiae of the two-year investigation.
What did we learn?
Perhaps the most important take-away has nothing to do with Trump or the Russians. The Mueller Report was never going to persuade entrenched ideologues on the right or left. The reaction of the parties themselves, however, will be scrutinized by the most valued facet of the electorate: non-ideological moderates with little to no party affiliation. Who remain the swath of the electorate that win and lose elections. And after two years spent looking under every stone on God's green earth, they will react adversely to any partisan response that does not align with their definitions of truth and reason.
Ultimately, it will be voters, not prosecutors, politicians nor pundits, that determine who may or may not be fit to occupy the White House. And while voters believed that an investigation into possible collusion was merited, new polling reveals a mounting exhaustion with the never-ending hyper-partisan political environment.
Americans always seek justice. But they also expect fair play conducted among real adults. Let us hope that a spring cleaning is upon us. One that enables the electorate to get back to take a well-deserved respite from partisan warfare. And refocus on that which truly matters.
On the front lines of the trade wars, Chinese diplomatic sources recently predicted an agreement would be reached in late May. Though there remain plenty of opportunities for key issues to prove problematic.
Trade talks reconvene this week as the China Beige Book highlighted "an unmistakable Q1 recovery" for the Chinese. Can such momentum be sustained? Let's hope so.
The Senate recently voted on the "Green New Deal," a proposed stimulus program that aims to address climate change and economic inequality, sponsored by Representative Alexandria Ocasio-Cortez and Senator Ed Markey.
Following the buzz around the program's announcement, the vote turned out to be a non-event. Not a single senator voted for it. Republican nor Democrat. All Senate Democrats running for president voted "present," even though all signed on as co-sponsors of the deal.
Finally, a recent Advisor Wellness Survey revealed that stress levels among financial advisers are 23 percent above the national average. And though stress can help optimize performance, it can also shorten your life. Of course, most of our clients are exceptionally grounded, non-stress-inducing types. And for the few who aren't? There's meditation, exercise and a steady stream of barrel-aged bourbon.
Onward and upward!
Weekly Results
Major indices finished up last week. The DJIA gained 1.67%. The S&P 500 rose 1.20%. While the Nasdaq climbed 1.13%. Small-cap stocks gained 2.25%. 10-year Treasury bond yields fell 3 basis points to 2.41%. Gold closed at $1,292.2, down $21.50 per ounce, or 1.64%.

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