Data
U.S. equity benchmarks were little changed last week.[1]
The S&P 500 dropped by 0.22% for 1st weekly loss in a month.1
The All-Country World Index was up 0.21%.1
S&P 500 sub-sectors were mixed last week.
Real Estate & Technology led to the upside.1
Energy & Consumer Staples led to the downside.1
The CBOE Volatility Index (VIX) moved lower by 2% to end the week at 17.42.1
US Treasury yields end the week lower across the maturity curve.1
The yield curve flattened slightly and remains off the lows hit in December.
Foreign bond yields were lower in Europe & Asia.1
Commodities as an aggregate asset class moved lower last week.
WTI Crude lost a little more than 0.50%.1
Gold gained over 1%.1
The US Dollar index dropped 0.60%.1
In our opinion, U.S. economic data was mixed last week.
Mortgage rates moved lower in December but it didn’t help resales which fell.1
Despite the record gov’t shutdown, jobless claims fell to the lowest level in 50 years.1
The Index of Leading Economic Indicators slipped 0.1% in December.1
An index of equities outside the U.S. (MSCI EAFE) outperformed its domestic peers last week.1
Conclusion
US equity indices ended the holiday-shortened trading week mostly positive.[2]
The Nasdaq & Dow Jones Industrial Average led to the upside with gains of 0.11% for their5th consecutive positive week.2
The S&P 500 was the only negative major index, posting a loss of -0.22%2
This was the smallest weekly move since October of ’18 and leaves the major domestic benchmark up north of 6% for the month of January.2
This comes after a decline of more than 9% in December.2
S&P 500 sub-sectors were extremely mixed last week.
Real Estate led to the upside with a gain of 1.44%.2
Energy & Consumer Staples led to the downside with losses of 1.43% & 1.37% respectively.2
We believe there was no dominant theme in sector performance during the last week of trading despite there being a 3% difference between the best/worst sector performers.
Interesting to note that cyclical areas of the market have outperformed thus far in 2019 which is the exact opposite of what occurred in the 4th quarter of 2018.
In our opinion, this could be related more to short-term positioning & short covering than a real change in the market’s expectations for future growth/earnings of these areas of the market.
While Energy & Financials are currently up over 9% in 2019, we’d like to point out that these sectors are still down more than 13% over the last 1 year.2
US Treasury yields ended the week lower and the yield curve flattened slightly.
We’d like to reiterate our opinion that despite the consensus/conventional narrative, we don’t think an actual inversion of the yield curve (short term maturities yielding more than longer dated ones) is necessary in order to signal an economic recession.
We believe the more powerful event in yield curve analysis at this stage in the business cycle is short rates falling faster than the 10yr & 30yr maturities.
A Wall Street Journal report on Friday indicated that the Fed may be getting close to the end of its balance sheet normalization efforts.
This report provided some comfort to stocks as market participants seemed to believe this “de facto tightening” method by the Fed could soon be over.
The US Dollar sank 0.6% for its biggest weekly drop since Nov in tandem with the Fed report.2
25% of S&P 500 companies have reported 4th quarter earnings so far. 2
Roughly 70% have beaten on earnings estimates while less than 60% have surpassed on sales.2
We believe it’s important to note that the average revenue surprise so far this earnings season has been negative.
Ryan A. Mumy, CFP®, AIF®
Chief Investment Officer
Contact:828/855-9400 or info@CIASonline.com or rmumy@bloomberg.net
[1] Source: Bloomberg – 1/25/2019
[2] Source: Bloomberg – 1/25/2019