The U.S. is closed today for Martin Luther King Jr Day, but that doesn’t change the fact that we are starting Week 5 of the longest government shutdown ever. The shutdown is causing domestic economic data releases to be delayed, but the rest of the world continues to release slowing economic activity. China’s economy slowed to 6.4% growth in the 4th quarter and for all of 2018, the economy grew 6.6%, the slowest increase in 28 years (read that again…6%+ growth is their slowest in almost 30 years!). Thank you, more restrictive domestic policies and higher US trade tariffs!
Last week, the SP500 continued its post XMAS 2018 rally, rising back to 2675, or flat with the end of 2017. A combination of rumours on China/U.S. trade, better than expected bank EPS reports (estimates had been cut for almost 9 straight months), and the “fear of missing out” (FOMO) on a stock rally induced positive money flows into the stock market and out of the safety of US government treasuries.
Early this week the focus for many markets will be on Brexit and how it plays out for European monetary policy. Although global Quantitative Easing is officially over, rates remain low and governments are increasingly dovish and ramping fiscal stimulus. While others focus on macro events, we will be focusing near term on the micro and the deluge of earnings reports mid-week. We anticipate continued dovish Federal Reserve commentary at the end of the month, coincident with progress on the Chinese trade front. These factors should bias the market higher through mid-February when stock buybacks peak and macro factors once again push there way to the front of investors mins and actions in the 2nd quarter of 2019.
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.