05.13.2019 – The 2nd Quarter Pullback Comes Knocking

The 2nd Quarter Pullback Comes Knocking

By Chris Perras, CIO

U.S. SP500 equity futures are down about 1.5% this morning and almost 2% on the NASDAQ.  This is being driven by increasing concerns over the escalating U.S./China trade war.  As we previewed way back at the beginning of January, the “deadzone” of May through late June was the most likely time for a 5-6.5% move down in the markets.  We continue expect the markets to find footing in late second quarter/June.  Additionally, we have expected one last Treasury rally to occur in the second quarter, contrary to early in the year calls for higher rates. Most Treasuries are rallying 3- 5 basis points. The dollar and yen are stronger in classic “risk off” moves flight to safety moves.

The U.S. raised tariffs to 25%, from 10%, for $200 billion in goods leaving China on Friday and thereafter. President Trump also ordered staff to begin the paperwork to impose levies on the more than $300 billion worth of everything else China sells to the U.S.

 Despite Friday’s gains, the S&P 500 and Nasdaq are coming off their largest weekly losses of 2019, and the Dow has posted three consecutive weekly losses. Bitcoin jumped above $7,000 over the weekend, continuing a stunning comeback for the cryptocurrency in 2019.  We believe this is strongly correlated to Federal Reserve monetary policy.

As volatility spikes, and valuations become more attractive, we will move from the “go-slow” mode of investing that we’ve been in for over 2 months, to a more accelerated investing schedule. Volatility, while not enjoyable, breeds opportunity for long-term investors.

 Weekly market updates contain general information and express the views of Oak Harvest Investment Services. Data and information cited is believed to be reliable at the time of creation, but is not guaranteed. Content should not be regarded as personalized investment advice. Views and opinions expressed may change without notice and do not constitute a recommendation, or an offer or solicitation to buy or sell securities. In addition, Oak Harvest makes no assurance as to the accuracy of any forecast made. Past performance is not indicative of future results. Investing involves the risk of loss.