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Market Update May 2019

2018March-market-update

 

As I write this, the market is all over the place due to uncertainty of our trade agreements with China.  Terms were not met as of last night’s deadline, so additional tariffs will be imposed on imports from China.  Right now, market participants are trying to figure out how to value stocks in that environment and what their courses of actions should be if the trade deal eventually is or is not met.

 

As I mentioned in my April update, I was concerned about the stock market (the S&P 500) being overbought, but that condition has largely corrected itself.  Between the flat market of last week, and the down market this week, I think the S&P 500 is pretty fairly priced right now, at 2863.  Of course, assets don’t always sell for a fair price, so sellers may keep selling, pushing stock prices down further, possibly to where they are oversold.  For many of our discretionary accounts, we are sitting on more cash than usual, and we made a nice move into Treasury bonds a few weeks ago.  Often, when the stock market falls, Treasury bond prices rise, and that is what happened this time.  So, we’ve has some investments actually increasing in value this week.

 

Despite the volatility, the pullback doesn’t even register on my long-term charts, and we are still well above trend lines.  Because of the rapid recovery we had in the first quarter, support for the S&P 500 is about 3% below where we currently are, so if there’s no trade deal, we could move a little lower.  If so, I think we’ll be buying stocks at that level.

 

There’s still more positives than negatives for investors, I think.  Amazingly, initial jobless claims keep falling, which is a great leading indicator.  Liquidity abounds, demand is still in control, and consumer confidence is high.  On the flip side, we are heading into the historically weak season for stocks (May-October), and railcar loads are down.

 

All in all, from here, I don’t expect the S&P 500 to move meaningfully higher through the end of the year.  There will be pullbacks and advances, but after being up about 15% so far in 2019, I can imagine the market not moving much higher.  What I do believe will happen is rotation.  Sectors that are doing well now could well rotate out of favor, while unloved sectors could see money flow in.  If so, that bodes well for healthcare, basic materials, and oil stocks.  Also, small cap stocks may not be as impacted by tariffs, since many of them don’t trade overseas.  We could see money flow from large, multi-national companies into the smaller stocks.

 

Either way, I am comfortable with our positioning.  We are well diversified, and we invest in companies with growing earnings expectations, which, over time, is a main driver of stock performance.  I’m not suggesting a change in allocation now, but I will keep you posted.

 

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 forgoing is not a recommendation to buy or sell any individual security or any combination of securities.
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 obsolescence. International investing involves special risks, including currency fluctuations, differing financial accounting standards, and possible political and economic volatility. The prices of small company stocks may be subject to more volatility than those of large company stocks, and therefore, may not be appropriate for every investor. 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.  Investing in oil 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.  Raymond James does not provide tax or legal services.  Please discuss these matters with the appropriate professional.
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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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