By: Jim Rambo, CFA, Allegheny Research Team
Stocks continue to find their footing coming off a difficult December and 4th quarter that left 2018 in the red for the first calendar year since the Global Financial Crisis in 2008. For the first two weeks of the year, the S&P 500 is up 3.6% which is a welcome start. Stocks are now up over 10% from their December lows reminding us why it is important not to panic and make an emotional decision to sell in a difficult moment. For example, if you would have sold in December after the -4.8% two-day decline which was the worst since 2015, you would have missed the 5.0% return the very next day which is the best since 2009.
The mood surrounding the U.S. and China’s trade negotiations was cautiously optimistic last week but remains tense overall. Reports indicated some progress towards an agreement with the Chinese promising to buy more U.S. agricultural and energy commodities. The more significant issues of the Chinese government subsidizing their state-owned companies giving them an unfair advantage in the global marketplace and the violation of intellectual property rights are expected to be addressed again when higher level talks occur in a couple of weeks.
Minutes from the Fed meeting were released last week signaling they will remain patient in continuing their tightening path. Chairman Powell reiterated the emphasis on patience at a speaking engagement saying the Fed will let incoming economic data guide the policy ahead. This has calmed the market as concern over the Fed causing a recession by tightening too quickly has subsided for now.
On a less positive note, BREXIT negotiations continue to be difficult with a growing push for the UK to ask for an extension on the upcoming March deadline. To make matters more difficult, data continues to show slowing economic growth out of Europe. The partial government shutdown in the U.S. is entering the fourth week with little hope for resolution in the immediate future. Historically, shutdowns have had very minimal impact on the economy. However, if Federal workers continue to be unpaid, tax returns are delayed, or payments for social services are disrupted, the effects on the economy could become real very quickly.
Author: Jim Rambo, CFA | Research Team | Allegheny Financial Group | January 2019
The information included herein was obtained from sources which we believe reliable. This report is being provided for informational purposes only. It does not represent any specific investment and is not intended to be an offer of sale of any kind. Past performance is not a guarantee of future results.
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