Markets “In a Nutshell” for March 5, 2019

Investment Week at a Glance

Stocks finished mixed for the week.  The Dow Jones Industrial Average was down -0.02%, the S&P 500 rose 0.39%, the New York Stock Exchange Composite (2,000 stocks) was up 0.05% and the average investors index (Value Line Index) was down -0.39%.  Foreign stocks (DJ Global ex U.S.) were up 0.05%.  Bond prices were lower for the week, pushing the yield on the 10-year U.S. Treasury up 10 basis points to finish the week at 2.76%. (Data sources: Wall Street Journal)

U.S. economy grows at 2.6% annual rate in the 4th quarter

The U.S. GDP report for the 4th quarter of 2018, which was released a month late due to the government shutdown, showed that the U.S. grew at one of the fastest years in the decades long expansion at 3.1% and the second straight year of at least 3% growth. Even more impressive is that this exceptional year occurred near the 10 year anniversary of the bottom of the S&P 500 on March 9, 2009, making it one of the longest bull markets on record that continues to produce strong results. One of the more interesting notes from the report was that consumer spending and business investment remained strong during a turbulent stock market period where possibilities of a recession were haunting investors. 2019 looks to be a little more uncertain with the immediate effects of the tax bill wearing off and U.S./China trade negotiations still in the process of working out critical details, but the labor market continues to be strong enough to support a growing economy for the near term. (Wall Street Journal)

U.S. and China Nearing Trade Agreement

The U.S. and China have both signaled that a trade agreement is in sight despite some significant hurdles that still need to be resolved. The deal, which could be reached by the end of March, seems to include a large reduction in most, if not all, of the tariffs the U.S. has placed on China in exchange for much wider access to China for industries such as autos and finance that require some level of partnership with Chinese firms, as well as a lowering of tariffs on U.S. agriculture and manufacturing that has hindered any exports of American products to China. Specific details have yet to be released on terms of the agreement and any news is subject to change as both China and the U.S. are facing increasing pressure in their home countries to achieve a breakthrough deal to stabilize and continue growing both economies.

A deal between the two parties has become increasingly likely since China struck a deal for a 90 day pause on an increase in tariffs on $200 billion worth of Chinese goods on December 1st. While reaching any deal that results in the lowering of tariffs on both the Chinese and U.S. sides would result in a positive outcome for markets, some industries could be disappointed by the results. China has been offering to buy more agricultural and energy products to sooth U.S. concerns about the massive trade deficit it has with the U.S., but has been much more unrelenting in giving up any concessions regarding U.S. technology and intellectual property. Even if a deal is reached in the coming months, it’s hard to see this conflict truly being resolved and may only ensure that there will be a technology race between the two countries lasting for the foreseeable future. (Wall Street Journal)

Quiz:

With the S&P 500 up 12.26% as of 3/1/2019, this has been the best beginning two months since what year?

a. 2010

b. 1998

c. 1991

d. 1987

Answer is below…

 

Have a good week!

 

Answer to quiz:

c. This has been the best two month start to the year since 1991