Oak Harvest: Market Update – Feb 25, 2019

By Chris Perras, CIO

Equity markets rose again this week, led by a 5.4% jump in China on continued reports that U.S. and China are working to de-escalate trade tensions. While now flat with December 1, 2018 and now flat for 14 months, financial headlines reading “the SP500 is up 11.4% year to date” makes a great headline and sensational, emotional reading.  We expect this leadership in China and cyclicals stocks to continue for a few more weeks, as investors who dumped $150 billion in stocks in November and December of 2018 scramble to “get back in”.

We, on the other hand were buying cyclical and technology stocks in November and December as others were panicking, are already shifting behind the scenes into healthcare and staples as 1) there is value there now and 2) expect a 2nd quarter 2019 mild pullback in the market.  The U.S. economic data continues to increasingly disappoint.  Retail sales, durable goods orders, and existing home sales all have missed estimates recently.

The biggest news of the week wasn’t out of Washington D.C. or China or earnings.  A little noted article late in the week mentioned the possibility of our central bank allowing inflation to run above its target of 2% because there have been “persistent shortfalls of inflation below its 2% target” and the Federal Reserve might target “make-up strategies” or “overshoots on inflation”.  The team at OHFG thinks this is a rare, legitimate, game changer on the news front for the 2nd half of 2019 and 2020.  This story plays right into our outlook for stocks and bonds for the 2nd half 2019 and 2020.  We will be posting that outlook closer to mid-year but expect us to continue to make some adjustments in advance of the second half.  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 and are current as of the date of posting. Content should not be regarded as personalized investment advice. Views and opinions may change based on new information or analysis. 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.