05.06.2019 – Easter Bunny Brings “Market Melt-Up” at SP500 2925…Not!

By Chris Perras, CIO

The calls for a market “melt up” started around SP500 2900-2925 around Easter. We believe these market calls are comical given a move to 3000 would amount to about 1.5% higher than the all-time highs. Moreover, many of these same individuals called for “retests of the lows”, economic recessions looming, and over valuations on stocks in December of 2018 through this March! Listen to our most recent podcast edition of “Keeping you Connected to Your Money”, for our thoughts on stocks and the economy here, “Yes Emily, The Easter Bunny is Real…”

This week is starting off down thanks mainly to our President’s new tweets on the China negotiations. He announced tariffs on $200 billion worth of China’s goods will go from 10% to 25% this Friday, and $325 billion worth of goods will go shortly from no tariffs to 25%. This, just before Vice Premier Liu was scheduled to fly to Washington D.C. The talks will go on, though there are rumors that the Vice Premier may arrive a few days later than planned.
U.S. stocks are poised to open 1.5-2% lower. European stocks are down about 2%, on average. The Asian session was far worse with China down 5.8% and the Shenzhen Composite, Chinese Small Cap index, down 7.4%. Japan is closed.

China immediately injected money into the market to boost liquidity, and announced plans to lower the reserve requirement ratio for small banks to 8%, effective May 15. The dollar is higher as is the ultimate safety currency, the Japanese Yen. Yields are lower on flight to safety. Earnings season is almost over. We are entering the oft-mentioned “deadzone” for stocks through late June.

We continue to believe that the 2h2019 and 2020 will be much more positive than others are forecasting. We will use any second quarter increase in volatility, weakness in stocks, and strength in bonds to continue to shift positions toward a second half acceleration in the economy and stock market. We will be posting our outlook closer to mid-year but expect us to continue to make some adjustments in advance of the second half. Until the 2h2019, “Rotation Nation” will be the general rule. Our first half 2019 market outlook and commentary can be found here.

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.