The Big Market Story Of 2019 Remains...

It was another lackluster session, but stocks bounced into the close to limit the decline on Thursday. The winners were defensive in nature; Consumer Staples, Real Estate, and Utilities. 

The big story of 2019 remains the outperformance of value versus growth, as investors continue to seek opportunities outside the momentum darlings of the last two years. We can measure how well value has performed using equally-weighed indexes, where each component has the same influence. Equal weight changes the influence of S&P sectors, comparing value (SPW) and growth (SPX).

Value Charges Ahead

In some ways, comparing the value of growth is like the fable of The Tortoise and the Hare. If that’s the case, the former is making its move as the latter naps.

The S&P 500 cap-weighted index is up more than 10% year-to-date, but the S&P 500 equal-weighted index is almost up 14%.

I think this trend will continue for the foreseeable future.

Fed Parade

Today, the University of Chicago Booth School of Business will host the U.S. Monetary Policy Forum. The program will focus on prospects for inflation with a high-pressure economy. It will be a Fed talkfest galore.

• Mary Daly, Federal Reserve Bank of San Francisco
• John Williams, Federal Reserve Bank of New York

The keynote speech will be given by Richard Clarida, Board of Governors of the Federal Reserve.

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The panel discussion on the Future of the Federal Reserve's Balance Sheet includes:

• James Bullard, Federal Reserve Bank of St. Louis
• Lisa Emsbo-Mattingly, Fidelity
• Randal Quarles, Board of Governors of the Federal Reserve

The panel will be moderated by Patrick Harker, Federal Reserve Bank of Philadelphia.

There’s a good chance comments from this event will move markets.

Taxes Too High or People Too Greedy?

Just consider news from around the world this week:I know this isn’t shocking, but no one likes paying taxes. Even rich people that cheer the notion of higher taxes hire armies of folks to help them pay as little as possible.

Yesterday, the French court slammed Swiss Bank UBS with $5.1 billion in fines and damages for its role in helping wealthy French citizens evade $10.8 billion in taxes. 

There was news of Danske Bank being under investigation for facilitating the laundering of $230 billion, mostly by Russian citizens through its branch in Estonia yesterday. Without a doubt, Russian billionaires are more active in seeking tax havens and investing money outside their country.

However, the United States loses the most tax revenue to tax havens than any other country by far.

Also, Australia’s Tax Avoidance Taskforce announced this week that it has recouped $7.7 billion from foreign-owned companies, multinational companies, and $4.7 billion from wealthy individuals.

Yes, individuals (many heroes of Millennials and progressives) are just as eager as corporations to not pay taxes.

Last year saw high-profile examples from around the world, including China, where actress Fan Bingbing was fined $70 million for tax evasion, and where soccer superstar Ronaldo forked over $21.6 million to avoid going to jail in Spain.

That said, all of this begs the question: are taxes simply too high and too unfair, or are businesses and wealthy people simply too greedy?

Portfolio Approach

The balance of the portfolio remains the same, but many ideas in the model portfolio are above our buy limit. Meanwhile, there are a couple of malingering ideas that look much better and are attractive buys right now. Make sure to check with your rep or research@wstreet.com.

Today’s Session 

It will be interesting as all eyes are on the Fed and the White House, where President Trump is meeting with vice premier of China at White House. The race against the clock is moving faster, and while there is a general feeling things will work out, its by no means guaranteed.