Best Week of the Year/Fed & Interest Rates
Upcoming Earnings, China Impact
All arrows pointed north for Stock indexes last week with the US Stock Market posting its best weekly performance of 2019. Low inflation, good consumer sentiment, and good earnings from the semiconductor sector trumped the headlines of a slowing Global Economy.
For the week, the Dow rose 1.64%, despite the pressure from Boeing’s Stock drop, the S&P 500 moved up 2.95%, the Nasdaq Composite led, rising 3.78%. The small cap Russell 2000 rose 2.13%.
Oil has resumed its upward ascent, closing Friday @ 58.52 per barrel, up from 45.41 on December 31, 2018.
US Bond yields dropped moving the Barclay’s Bond Index higher for the week by .23%. The closely watched 2-10 year US Treasury slope narrowed to only .15%. Worth continuing to watch closely.
Not to be outdone, over the pond, the EAFE International Index rose 2.81% and the Emerging Market Stock Index rose 2.67%.
Fed and Interest Rates
The Fed will announce their latest rate hike decision on Wednesday. Listening to the financial news media, it appears the prognosticators are now thinking the Fed is definitely on hold for 2019, although some believe a rate hike will happen in December. Others are on the complete opposite side of the spectrum, believing there is a 25% chance, the Fed LOWERS rates this year.
We’ve transitioned from the Fed telling us last September that rate hikes have a long ways to go, to the current thought, rates are going nowhere for the time being. Has the Global Economy really changed that much in a few months?
Upcoming Earnings/China Impact
In approximately a month, 1st Quarter Corporate Earnings will be released. It’s no secret that the China Trade Issue has impacted corporate profitability and visibility about the future. The bar for earnings has been driven much lower recently, so if earnings come in as they’ve been trending, it could be good news.
What if we get a trade deal? What if we don’t get a trade deal?
If Corporate Earnings are down and we get a trade deal that appears favorable, the Markets could discount any earnings weakness and move higher. If earnings are down and we don’t appear to be getting a favorable trade agreement, the Markets could correct.
If corporate earnings are up in a meaningful way and we don’t get a trade deal, the markets may continue sideways for a while.
If Corporate Earnings are up and we do get a trade deal, most believe the Markets will move higher, perhaps to a new all-time high, which is not that far away now. If this happens, I will be watching to see if the Federal Reserve will resume its prior path of interest rate increases?
What will happen? As ALWAYS, time will tell?
Question of the Week
Major league baseball opens up the 2019 season on March 28th.
What team had the highest “average” ticket pricing in 2018?
a) Boston Red Sox
b) New York Yankees
c) Los Angeles Dodgers
d) Chicago Cubs
e) Washington Nationals
Answer to Last Week’s Question
Income Taxes: How much did the top 10% of income earners pay of our United States federal income tax in 2016? (The average adjusted gross income of this group was approximately $140K)
a) 25%
b) 80%
c) 69%
d) 50%
Answer is:
c) 69%
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