Strong Year in the Markets—12/23/2019
As the year is coming to a close, the market has been very strong. As I type this, the price change on the S&P 500 is a positive 28.5% for 2019. All this has occurred with political turmoil swirling within the United States, a trade war raging between China and the U.S., and geo-political uncertainty popping up all over the world.
The question that many may ask is, why? Why has the market rallied so hard to the upside with all these uncertainties in the air?
I think the answer to that question is; earnings.
At the end of 2016, S&P 500 earnings’ were $94.55. Projected 2019 S&P 500 earnings are $140.55. Running the numbers and those data points shows a 48.5% cumulative growth rate in earnings over that time frame.
There is no question; that will make the market move!
The market has been very strong this month with the price change on the S&P 500 being up 6.34% month to date. Performance numbers like this should represent a growing economy and booming earnings. However, the latest employment report has a drastic disappointment and earnings growth is slowing. Additionally, all the talking heads on tv are discussing when the Fed will cut rates. And, as we know, the Fed cuts rates to help stimulate a stalling economy.
So what gives? We have a roaring stock market and a potentially slowing economy.
This is something to watch for sure.
GDP Surprises to the Upside—-4/26/2019
Expectations were for 2.5% growth, but the U.S. posted 3.2% GDP growth in the 1st quarter.
S&P 500 Posts Monster 1st Quarter—4/2/2019
The 1st quarter of this year the S&P 500 put up its best start to a year since 1998. On a price basis, the S&P 500 appreciated 13.07% for the quarter. Makes sense given how bad December was, but is a little fishy given that earning’s growth is set to slow. Nevertheless, we will be watching how things develop very closely.
Europe Lowers Their Growth Forecast—-3/7/2019
The market is weak today due to the ECB lowering their forecast for growth for 2019.
An Interesting Twist from the Fed—-2/20/2019
Almost all the volatility in the 4th quarter was caused by the Fed Chairman and his clumsy language. And some of those comments focused on the “autopilot” program regarding the Fed’s balance sheet normalization and how the Fed had no intention of stopping that program.
Well, today the Fed said they were going stop the program later this year!!!
What in the world is going on?
First, the Fed rattles the markets saying they aren’t going to stop this program under any circumstances. And then after the market rallies hard to the upside, they say they are going to stop the program.
I see two possible reasons for this change of heart…
1) the Fed has become totally beholden to asset prices and this move helps ensure prices will move higher (note: this is a total 180 degree turn from Fed Chair Powell’s comments late last year)
2) the economy is much worse than market participants realize and this move will help bolster the economy as it slows.
Not sure which one it is, but it is one of the most interesting moves I’ve seen in the markets for quite some time.
After one of the worst Decembers in market history and THE worst Christmas Eve trading day EVER, the market has put up some incredible return numbers to begin 2019. As I type this the S&P 500 is up over 10% year to date…and it is only February 19th!! If you annualize those numbers, you get 103%.
I think it is fair to say that it is highly unlikely that the market will posted gains of over 100% for the year. With this in mind, I expect a pullback at some point in the near future. Maybe after a trade deal with China is inked. Why? Well, it seems that every day we get news that trade negotiations are going well and the market moves higher. Before too long, all the good news could be priced into the market and there will be nowhere to go from there.
Regardless of why the market pulls back, I expect that it will. A 103% return for the market just seems unlikely to me for 2019. Nevertheless, we can have a VERY nice year this year.
Biggest Upside Move in the History of the Dow—12/26/2018
After the worst Christmas Eve trading day EVER, the Dow rallies 1,086 points the day after Christmas to post its biggest upside point move in its history. This move almost doubled the downside move that occurred on Christmas Eve! WOW!!!!!!!!