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Market Update March 2019

2018 October-market-update

Given the stock market (S&P 500) pullback over the past 2 weeks, I wanted to provide my thoughts on what might be happening.  First, I think this is just a fairly normal reaction to the very abnormal run higher we had from Christmas Eve through the end of February.  Stocks don’t typically move up like that, so a little pause to catch our breath seems needed.

 

I don’t think this is the beginning of a new downward spiral like we had in the 4th quarter of 2018.  I’ve identified support at 2640 and 2600 on the S&P 500, which would represent a decline of about 4% or 5% from the March 7 close, or a decline of 6-7% from the  March 1 high.  If we close below 2750, which looks likely as I am writing this on March 8, we could head a little lower, maybe even to the 2600-2640 level.

 

I don’t believe this is a tradeable event, though.  There’s just not enough downside to risk a hedging strategy, in my opinion.  If anything, I likely will be buying.  My indicators show more good than bad.  Momentum is positive, economic activity is good, consumer confidence is high, there’s lots of liquidity, and transportation stocks are doing well.  There are some things I’m keeping an eye on, though.  Stock market levels are still a bit extended, railcar activity (Warren Buffet calls this his favorite indicator) is declining, the Federal Reserve is not as accommodating as over the past few years, the yield curve is flat, and initial jobless claims numbers are less positive than they have been in a few years.  The bulk of the numbers indicate higher stock prices, but, as you can see, not everything is rosy.

 

I mentioned in one of my recent update that I felt that we were approaching a flashing yellow light.  We needed to use caution before going forward.  I still am leaning toward the cautious side, but I think we can move higher over the intermediate term.  Since there is no ticking clock for economic expansion, it’s always hard to tell these things in the middle of the action.  Sector movement suggest that we are still in the mid-phase of expansion, so I’m not prepared to get defensive, yet.  As they saying goes, “They don’t ring a bell at the top,” so there won’t be a warning when the stock market hits its high.  It may have already happened.  But given what I’m seeing, I think stocks can still move higher.

 

If your situation has changed, or your risk appetite has shifted, or financial deadlines are coming up, those are things that you should make us aware of so that they can be factored into your allocation.  Combined with my outlook for the market, we can create a portfolio to suit your circumstances.

 

As always, these recommendations are mine, and may or may not be the same as those of Raymond James.  This is not a solicitation to invest, although we do invite you to review your portfolio with us to see if any changes should be made.  Past performance may not be indicative of future results. There is no assurance any of the trends mentioned will continue or forecasts will occur.  Investing involves risk including the possible loss of capital. Asset allocation and diversification do not guarantee a profit nor protect against loss.

 

 

 

 

 

The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Individuals cannot invest directly in any index.  Index performance does not include transaction costs or other fees, which will affect investment performance.  Individual investor results will vary.  Dividends are not guaranteed and must be authorized by the company’s board of directors.   Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Sector investments are companies engaged in business related to a specific sector. They are subject to fierce competition and their products and services may be subject to rapid obsolescenceBloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. There are additional risks associated with investing in an individual sector, including limited diversification. Investing in the energy sector involves special risks, including the potential adverse effects of state and federal regulation and may not be suitable for all investors.  The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Scott Mitchell and not necessarily those of Raymond James.  Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.  Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. 
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About Scott Mitchell

AAMS ®, Founding Partner SWS, Senior Wealth Advisor RJFS Scott is a cum laude graduate of Wake Forest University School of Business. He received additional training from the College of Financial Planning and earned the accreditation of Accredited Asset Management Specialist℠ as well as earning the Accredited Investment Fiduciary® designation.  Scott began his career at Southern National Bank. He then joined his father, Bob Mitchell, at First Union Securities for six years. At Signature, Scott directs investment strategy for the team and oversees the research and management of individual stocks, bonds and mutual funds. Scott lives in Florence with his wife and two children. He is a member and past President of St. Luke Lutheran Church, member and past President of the Florence Rotary Club, and on the board of directors of the Pee Dee Area Big Brothers and Big Sisters. Follow Scott on LinkedIn.

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