Oak Harvest Market Update – April 29th, 2019

1st Quarter EPS Recap: Disney, It’s a Magical Place… 3M, It’s not so MMM MMM good

Global equity markets were mixed this week, but USA markets found support from better earnings, a Friday payday passive flow, and stronger-than-expected U.S. economic data. The S&P 500 rose 1.2%, to a marginal record high.  Gains in “boring” health care, telecom and utilities groups negated pullbacks in cyclical energy, industrials and materials.

Earnings beats were led by megacap technology names Facebook, Amazon and Microsoft, names we have expressed interest in previously. The earnings news wasn’t all good as reports from semiconductor company Intel and industrial 3M were underwhelming. Those names had rallied to 52-week highs in advance of higher 2h19 earnings expectations, only to give up dramatic year to date outperformance in a single day.

Disney, a name we continue to pay attention to, continued its move upward throughout April, hitting $142 per share the morning of 4/29/2019.  It’s now up almost 25% for the month on the back of a historic opening weekend $1.2 billion in sales for its latest Avengers film.  We remain bullish on the stock, but we do expect the rate of change of stock performance to slow at least until the Frozen sequel is released in the 4th quarter.

This week marks the top in 1st quarter earnings reports and next week marks the peak in the ability for companies to buyback stock in the 2q before the “dead zone” and blackout window starts to come in play.  The market will increasingly be focused on macro news from mid-May through the end of June.  News that will probably cause short term anxiety and increased volatility made worse by the financial press declaring once again the “end of the good times”.  In our view, we observed two buyable periods last year in the “dead zone”, February and November/December.  Both periods turned out to be the only “dips” that may have given investors the potential for outsized returns.

We continue to believe that the 2h2019 and 2020 will be 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 expresses 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, opinions, and outlooks 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.

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