Market Strategy 11/11/2019
- November 11, 2019
You Ain’t Seen Nothing Yet
For all the new record highs reached by US equity markets recently, the S&P 500 is just 5.54% above its level on September 20, 2018
Key Takeaways
- With earnings season winding down trade talk progress and Fed Chair Powell’s testimony are likely to take center stage in a somewhat abridged holiday week.
- A recent series of record highs in the S&P 500 reminds us of the importance of keeping things in context and expectations right-sized.
- Last week’s economic data points to the resilience of the US economy even as the timing of a trade resolution remains uncertain.
- The Russell indices across the spectrum of market capitalization are beginning to show value stocks regaining favor as investors look to broaden their participation.
With Q3 earnings season moving into the final stretch over this week and next investors are likely to stay laser-focused on trade negotiation progress and any signs from the Federal Reserve Board as to how it might tweak monetary policy in the relatively few weeks that remain in 2019.
Getting some signatory ink on a “Phase One” trade agreement would likely provide stocks with further incentive to move higher than they already have this year—at least until investors begin to ponder just what the impact might be of such an agreement and how long it will take for it to flow into the economy and push corporate revenues and earnings higher.
In our view keeping things in context has been and continues to be essential to riding this bull market as developments and data flow traverse the proverbial transom on a daily basis. So far this year has worked out much as we expected last December when we looked for 2019 to be a “do-over year” with equities having a solid chance to get back to where they were at their peak on September 20, 2018 with opportunity for some additional upside should the economy stay on track and the tariff fracas between the US and China find some kind of resolution.
Over the course of the past few weeks as US equity markets hit new record highs with some regularity we have reminded investors we’ve spoken with in meetings across the country that for all the attention the latest series of record highs the S&P 500 has reached in 2019, the venerable benchmark stands not all that far from where it stood at its September 20, 2018 peak just prior to experiencing a near bear market correction through December 24th of last year. At the market’s close last Friday the S&P 500 stood just 5.54% above where it stood at its high for 2018 of 2,930.75.
The more than ten-year-old bull market has shown once again a capability to climb a wall of worry and grind higher.
We’ll take the market’s recovery and modest gain over the past 14 months gladly. Considering all the “water that’s flowed under the bridge” since last September. the US economy and stock market have shown remarkable resilience with the economy showing sustainability in the face of a trade war, “mid cycle slowing,” domestic and geopolitical noise and more. The more than ten-year-old bull market has shown once again a capability to climb a wall of worry and grind higher.
While we are loathe to count our chickens before they hatch we continue to expect some real progress to emerge from the current trade negotiations between China and the US. Both countries stand to benefit from an improved and revamped regime that restores a level of civility in trade between them based on a new platform of reference to deal with a myriad of differences of style, opinion, ideology and execution that are likely to persist between them over the course of time.
Today the bond market is closed for Veteran’s Day but the stock market is open. With a semi abridged holiday week and with earnings season winding down this week still some widely followed names in consumer staples, materials and information technology are scheduled to report earnings results (see page 5 of this report for our earnings scorecard).
Look also for Fed Chair Powell’s testimony scheduled for this Wednesday before the Joint Economic Committee on the central bank’s outlook to gather a lot of attention from investors and politicians.
Today is Veteran’s Day in the US. We thank our active and veteran members of the US military for their service.
John Stoltzfus
Title:Chief Investment Strategist, Oppenheimer Asset Management Inc.
John is one of the most popular faces around Oppenheimer: our clients have come to rely on his market recaps for timely analysis and a confident viewpoint on the road forward. He frequently lends his expertise to CNBC, Bloomberg, Fox Business, and other notable networks.
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