For the first time since October, the S&P closed above the 2815 level to end last week. Technology has driven this last leg higher with the equally-weighted Nasdaq 100 right on the cusp of fresh all-time highs and the Semiconductors continuing to exhibit leadership. More broadly though, the market still appears to be in the midst of a consolidation phase with the Russell 2000 still below its February highs and the Transportation stocks again lagging. These aren’t major blemishes, but nonetheless still suggestive of an environment where exposure to weaker investments should be reduced in favor of owning relative leaders.
Equity markets reversed course to post solid gains for the week despite no significant events to support market momentum. For the week the Nasdaq’s 3.78% gain more than offset last week’s 2.46% decline. The S&P 500® Index gained 2.89%, the Index’s largest advance since November, followed by the Russell 2000® Index (2.08%) and Dow Jones industrial Average (1.57%). Trade discussions continue between the U.S. and China with no significant developments. China did pass legislation enhancing the rights of foreign corporations operating in China. Expectations point towards an agreement with details anticipated in April. Europe is also taking steps to protect its economic interests from China’s increasingly assertive role in their economy; Europe’s position may provide some additional support for the U.S. stance on corporate rights. The U.K. Parliament, after once again rejecting Prime Minister May’s latest withdrawal agreement, held a non-binding vote to seek an extension to the March 29 deadline. If the UK decides that it wants to delay Brexit, it would need to obtain agreement from all 27 EU members; talks could take place before the EU leaders meet at a summit on March 21.
Global economic data have been mixed; the Chinese economy may be improving as Chinese exports markedly improved in March. Monetary policies remains benign as central banks are wary of additional actions which might hamper economic growth and potentially lead to a recession. The recovery of oil prices continues. Saudi Arabia’s aggressive production cuts, and lower Iranian and Venezuelan production, are supporting the recovery. A small surplus at the end of the first quarter may then lead to a potential deficit in the following months. Boeing stock remains under pressure following the second crash of its new 737 Max 8/9 aircraft. Investigations are underway to determine the cause which is likely related to new software technology.
Last week’s selloff may have provided an opportunity for investors to consolidate year-to-date gains. Benign headlines, and encouraging signs of China’s recovery, are supporting the market’s advance. December’s market fears have given way to expectations that U.S. economic growth, even though somewhat dampened by trade disputes, will improve.
Source: Pacific Global Investment Management Company
Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.
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Brian Amidei is Coachella Valley's only Barron's Magazine Top 1,000 Advisor in 2013 and 2014!
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The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighed index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.