Oak Harvest Market Update – April, 1st 2019

“A Year of Higher Volatility….NOT Likely to Happen!!!!”

Equity markets posted gains last week with most of the gain coming Friday of?… Yes, you’ve heard it here all year, passive payday money flows. The S&P 500 rose 1.2%, led by industrials and materials. The first quarter has wrapped up, and it’s been an eventful one. As we continue to say, it’s a replay of 2016 when the Fed went on hold, and volatility fell throughout the year (not linearly!). Here are some of the key themes in the first quarter:

Opposite 2018, every major market and every major sector posted a positive return in the first quarter led by utilities and real restate. This largely reflects a sharp rebound from the year end 2018 selloff. Internationally, China has led the advance, but this country’s stock market has been outperforming the US since late last summer. Technology has rebounded sharply on lower rates and a chase for growth companies. Of note is the defensive shift in March as consumer discretionary, industrials and materials have been roughly flat, while boring consumer staples led groups, up 3.8%.

A titanic and swift shift in monetary policy expectations was most important move in Q1. The Fed, and its chairman Jerome Powell, led this charge with his Jan 4th comments on being data dependent.

Concerns about a yield curve inversion continue non-stop in the financial press. OHFG believes that the rally in junk bonds is a much better forecaster of a second half economic upturn.

Banks and financials have been under pressure due to both lower rates and a flattening yield curve. Financials were up 8% in the U.S. in Q1, but that lagged the market, and the group was the worst performer in March falling more than 5%. OHFG has been very underweight financial stocks for over 2 years. We will be using the weakness in the middle of 2019 to buy financials given 1) they now present great long-term value, 2) investor hope in the group has turned to despair, and 3) our belief in a re-acceleration in the economy in 2h2019-2020…. “Without Fins, you can’t Win” will return as a market mantra by the 4q2019.

We continue to believe that the 2h2019 and 2020 will be much more positive than others are forecasting. 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 at https://oakharvestfg.com/2019-first-half-outlook/.

 

Sources for data include Bloomberg, Investor’s Business Daily, and other publicly available news sources. Weekly market updates contain general information and the views of Oak Harvest Investment Services. Content should not be regarded as personalized investment advice. Views and opinions expressed may change without notice. 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.

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