Last week saw equity and commodity indices trend lower. Just a smidge. But lower, still.
Big caps. Small caps. Foreign and domestic. Gold. Silver. Copper. All of them. Managing to beguile investors seeking something upon which to hang their hats.
The market's orientation coincided with a week full of soft economic data. Consumer spending was weak. As was GDP growth. And manufacturing. Initial jobless claims rose. Though last week marked the 61st consecutive week of jobless claims below 300K. The longest such streak since 1973.
That said, evidence exists that job growth is slowing. The Federal Reserve's labor market conditions indicators (LMCI) -- a composite of 19 different employment indicators -- was negative for the third straight month. Worse, it looks like it may have "peaked for the cycle," suggesting that the best job gains of the current expansion have occurred. And the pace may slow from here.
As Q1 earnings season wraps up, a few remaining companies came out last week with less-than-spectacular news. Costco. Caterpillar. Even L Brands, which reported a rare miss on soft sales from its Victoria's Secret unit. Bringing an audible sigh from investors (and men) across the nation.
After having peaked a couple of percentage points below last May's high, the market paused. Drifted. As if operating within a zero gravity room. Just floating indifferently. With few opposing forces pushing up or down with real conviction.
Politically, the primary season has concluded. Following Trump's victory in Indiana, Cruz and Kasich heard the fat lady sing. And while Sanders has all but vacated the race but for the formalities, he continues to rack up primary victories. Though lacking in delegates, he is tied with Hillary in number of states won.
It's striking to consider the impression this 74-year old socialist has made. I've seen "Feel the Burn" stickers in windows of multi-million New York City homes. Sanders yard signs in middle-class Midwestern neighborhoods. And billboards on L.A.'s Wilshire Boulevard. Though, upon closer scrutiny, the L.A. billboard was actually an advertisement for a local STD clinic that had co-opted the Senator's slogan. How's that for redistribution?
Even as traditional socialist havens like Venezuela, Brazil and Argentina are regurgitating their allegiances to distributionist systems. Many in the United States embrace it.
But, when Hope and Change brings eight years of 62-percent labor participation rates and negative wage growth, voters begin looking outside the box.
Now that the contestants have been decided, how will each impact markets should he or she win?
The reigning sentiment seems to be that Hillary would be good for the markets in the short term (stability), but bad in the long run (higher taxes, slower growth/too much regulation). Trump, the opposite view espouses, would be bearish short term due to uncertainty but bullish long run as he puts in place growth-oriented economic programs and slows the ongoing regulatory barrage.
Oil prices continue higher on multiple supply disruption concerns. Sadly, Alberta's Athabasca oil-sands fire rages on. With Reuters estimating at least 720K barrels per day in Canadian production offline. And upwards of 90K people displaced. Moreover, Nigerian production fell to 20-year lows following militant attacks. Libya's political conflict remains unresolved. And Saudi Arabia fired the longtime oil minister responsible for the Kingdom's campaign to keep production high and prices low to gain market share.
Finally, investors may be well served to know that seasonality stands against them these next two weeks. Bespoke Investment Group reports that the two-week period from May 9th to May 23rd has seen an average loss of 1.5 percent these last ten years. In fact, the period has posted positive returns in only four of the last ten years -- although three have occurred in the preceding three years.
Only consumer staples has shown a consistent return this time of year over the last decade. Though even that has been negligible, at 0.2 percent.
The good news? Bulls broke through the veil of the technical dome in which the S&P 500 had been caged since November 2014. The trick now becomes holding up at these levels. Or moving higher. Which would likely force some short covering. And create a rising tide capable of lifting all boats. Stay tuned.
Weekly Results
Major markets finished down last week. The DJIA lost -0.19%, while the S&P 500 fell -0.40%, and the NASDAQ fell -0.82%. Small cap stocks dropped -1.43%. The 10-year Treasury bond yield fell 5 basis points to 1.78%. Gold finished down $5.09 per ounce, or 0.39% last week.
