Anything But Comfortably Numb
By John Stoltzfus,
Chief Investment Strategist
Should April Showers Come Your Way
Investors should be prepared to take advantage of buying opportunities on dips
Investors stateside will likely return from the holidays this week with an eye for economic data that could provide clues as to what pace economic growth will take near term and a feel for how it might affect the opinions of monetary policy makers in Washington, D.C.
With a good number of markets closed for Easter Monday around the world including several in Asia and Europe, the US markets will likely serve as a focal point as investors stateside and elsewhere consider what tact the administration will take toward trade in the weeks ahead and what affects it could have on the US economy and the economies of its trading partners.
For now it’s good to have the month of March and the first quarter of the year in the rearview mirror. The start of the year provided something for every bull and bear as a mix of politics, economics and corporate doings jostled and rallied markets intermittently in each of the first three months of this year.
The Dow Jones Industrials, the S&P 500, S&P 400 (mid-caps) and the Russell 2000 (small caps) ended March lower on a year-to-date basis respectively falling: 2.5%, 1.2%, 1.2% and 0.40%. However, the NASDAQ Composite (some 40% weighted in tech stocks) managed to edge higher by 2.32% in the same period that the other key indices moved lower adding support to our belief in the ubiquitous nature of technology and its deeply embedded status in the lives of both companies and individuals on a global basis (see bottom figure on page 6).
For all the grinding and gnashing of teeth in much of the day to day market news tied to social media’s troubles (particularly regarding its apparent intrusions into the lives of individuals, corporate and governmental entities) the tech sector managed to show resilience not exhibited so readily by all but one of its sector peers. Within the S&P 500 only the information technology and consumer discretionary sectors managed to post gains for the quarter respectively rising 3.2% and 2.8% (see bottom figure on page 5).
“Investors might benefit from using this time to consider stock, sector and thematic opportunities that might have ‘gotten away’ from them in the equity markets’ powerful run-up at the start of the year…”
The Week Ahead
As the world turns and the second quarter unfolds the US non-farm payroll growth figure, the headline unemployment rate (expected by some to fall below 4.1% to potentially its lowest level since 2000), the labor force participation rate along with the year over year and month over month hourly wage gains figures will likely determine the tone of the market in these first weeks of April.
From here until first earnings season begins in a few weeks the markets likely will remain vulnerable to the tone of news flows tied to economic data from around the world and developments in trade talks conducted in the world’s regional quadrants.
The rotation and rebalancing process of the equity markets on a global basis in the weeks ahead should offer opportunities notwithstanding risks that may drive markets intra-day and day-to-day.
Investors might benefit from using this time to consider stock, sector and thematic opportunities that might have “gotten away” from them in the equity markets’ powerful run-up at the start of the year or in the rallies that have intermittently ensued since.
Fluctuating stock prices for now are likely best considered as a reemergence of “buy the dip” opportunities as inflation remains subdued, interest rates (though in process of normalizing) remain moderate, economies around the world continue to show improved fundamentals and opportunities for M&A, revenue growth and earnings improvement persist moreover with upside risk from tax reform stimulus.
For now fundamentals don’t appear to be deteriorating but rather are improving even as risks remain ever present on the landscape.
Based on past experience “carpe diem” would appear to apply.
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