The first quarter is in the books, and it was a remarkable three months for investors – if they were in the stock market. Sadly, lots of folks sold into the fourth quarter swoon. However, even more sadly, millions of Americans have been too afraid to get in the market or return since 2009, as they are reminded everyday by talking heads of why everything with the market is so wrong and frightening.
It’s has gotten worse since Trump has been in the White House. Much of the financial media looks at the news through a filter of anti-Trump animosity, so good news is bad news, or temporary, and bad news is the end of the world. I can only hope investors and potential investors (everyone else) look beyond the negative chatter to the long-term potential based on hundreds of years of facts.
Technology is surging, and it has taken the lead among S&P sectors, followed by Real Estate and Industrials, which came out the 2019 gate like a juggernaut.
S&P 500 Index | +13.07% |
Communication Services (XLC) | +13.30% |
Consumer Discretionary (XLY) | +14.99% |
Consumer Staples (XLP) | +10.50% |
Energy (XLE) | +15.29% |
Financials (XLF) | +7.93% |
Health Care (XLV) | +6.06% |
Industrials (XLI) | +16.49% |
Materials (XLB) | +9.86% |
Real Estate (XLRE) | +16.84% |
Technology (XLK) | +19.39% |
Utilities (XLU) | +9.92% |
Shifting Opportunities
While the rally is widespread, I think winners will be more difficult to find, as the path higher becomes more distinctive as many names become fully valued. We are beginning to see that with new 52 week highs against 52 week lows.
This is even more pervasive on the NASDAQ, which has seen the highs cut in half and lows up more than 200%.
NYSE Breadth: Milestones | New Highs | New Lows |
Feb 25 | 150 | 10 |
Mar 29 | 137 | 25 |
NASDAQ Breadth: Milestones | New Highs | New Lows |
Feb 25 | 146 | 16 |
Mar 29 | 74 | 46 |
I have never invested in “the market” but a basket of individuating selected ideas that I felt were undervalued based on an array of metrics. This is critical to remember as the rally becomes more selective.
Portfolio Approach
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Communication Services 1 | Consumer Discretionary 4 | Consumer Staples 1 |
Energy 1 | Financials 1 | Healthcare 2 |
Industrial 3 | Materials 3 | Real Estate 0 |
Technology 2 | Utilities 0 | Cash 2 |
Today’s Session
Equity futures were up all morning long after better than expected economic data out of China.
March Manufacturing Data
- PMI 50.2 from 49.2
- Production 52.7 from 49.2
- New Orders 51.6 from 50.6
- Exports 47.1 from 45.2
While the numbers were much better than expected, and gave investors a sigh of relief, the export component is still in deep contraction, which plays into this week’s trade talks in Washington, DC. China’s top negotiator is on his way right now, and there is increased optimism a deal will happen. A deal that changes the landscape and a deal with teeth.
Ahead of the meeting, there was another olive branch from China. The country announced hours ago it has banned all types of Fentanyl to fulfill a pledge made to President Trump.
The importance of this move is beyond words and quantification considering the swath of deaths and lost hope in America. See tables below.
This morning, strong numbers from Foxconn is pushing chip maker stocks in Europe higher, and it should help U.S. semiconductors, which is already the hottest niche in the stock market.
Technical Breakout
We could test that key technical resistance point on the Dow Jones Industrial Average today, and that would trigger substantially more buying.
The train has left the station.