The Navigator | June 2020 Equities had another positive month in May, which contributed to the S&P 500 having its Read More
April 1, 2019 |
What happened in March?
U.S. stocks closed out Q1 2019 with a positive March and notched the largest quarterly gains since 1998. The uptick was driven in part by growing consensus that the U.S. Federal Reserve will hold interest rates low due to concerns of slowing global economic growth, and by some renewed optimism about U.S. – China trade talks. Valuations were also more attractive after the volatile market decline in the final months of 2018 pared back stock prices. Domestic equities have recouped almost all of last year’s 4th quarter losses and prices have returned to more elevated levels.
Both U.S. and global bond prices increased in the month of March, which appears to have been a movement of some investors to safer assets due to global economic growth concerns and the general lack of inflation. Uncertainty across the globe has continued, especially regarding Brexit negotiations, which garnered a lot of attention last month because of the inability of the U.K parliament to pass a Brexit agreement.
Moving into April
With so much attention on the Federal Reserve, equities may have unexpected reactions to both positive and negative news. Economic data pointing to possible slowing growth could actually bolster stocks because the outlook on rising interest rates would become less likely. However, we are also aware of the possible cooling of global economic growth and have been watching this development for some time to understand its impacts independent of the implications on rate policy. At the end of Q1 we sit 77% invested in our domestic tactical strategy and 76% in the international tactical strategy. We feel confident with the room to increase exposure in the case of more positive data in the coming weeks and months, and to scale to more cash should the data turn more negative.
↓ Valuation | Valuation indicators remain negative after more positive price action in March. P/E ratios are hovering around the same levels as February. The recovery from the losses at the end of last year has brought prices back to elevated levels similar to September of 2018.
↔ Sentiment | Sentiment indicators continued their modest recovery in March. The University of Michigan Consumer Sentiment Survey rose almost 5 points to 98.4. Investment flows into the SPY ETF were positive again last month. Lowering mortgage rates could see an uptick in housing sales.
↑ Technical | A positive March and first quarter boosted major stock indexes above their long term averages. The S&P 500 sat 3% above its 200-day moving average at the end of last month. Volatility also lowered slightly with the VIX moving from 14.8 to 13.7 on 3/31/2019.
↔ Macroeconomic | Macroeconomic indicators moderated slightly in March. Data released last month showed that personal consumption expenditure rose by less than anticipated in January. Inflation also appears to be lagging behind the Federal Reserve’s 2% target. The government shutdown in December and January may have impacted some data.
Important Disclosure Information
As of 3/31/2019. Data provided by Bloomberg, NorthCoast Asset Management.
The information contained herein has been prepared by NorthCoast Asset Management LLC (“NorthCoast”) on the basis of publicly available information, internally developed data and other third party sources believed to be reliable. NorthCoast has not sought to independently verify information obtained from public and third party sources and makes no representations or warranties as to accuracy, completeness or reliability of such information. All opinions and views constitute judgments as of the date of writing without regard to the date on which the reader may receive or access the information, and are subject to change at any time without notice and with no obligation to update. This material is for informational and illustrative purposes only and is intended solely for the information of those to whom it is distributed by NorthCoast. No part of this material may be reproduced or retransmitted in any manner without the prior written permission of NorthCoast. NorthCoast does not represent, warrant or guarantee that this information is suitable for any investment purpose and it should not be used as a basis for investment decisions.
PAST PERFORMANCE DOES NOT GUARANTEE OR INDICATE FUTURE RESULTS.
This material should not be viewed as a current or past recommendation or a solicitation of an offer to buy or sell any securities or investment products or to adopt any investment strategy. The reader should not assume that any investments in companies, securities, sectors, strategies and/or markets identified or described herein were or will be profitable and no representation is made that any investor will or is likely to achieve results comparable to those shown or will make any profit or will be able to avoid incurring substantial losses. Performance differences for certain investors may occur due to various factors, including timing of investment. Investment return will fluctuate and may be volatile, especially over short time horizons.
INVESTING ENTAILS RISKS, INCLUDING POSSIBLE LOSS OF SOME OR ALL OF THE INVESTOR’S PRINCIPAL.
The investment views and market opinions/analyses expressed herein may not reflect those of NorthCoast as a whole and different views may be expressed based on different investment styles, objectives, views or philosophies. To the extent that these materials contain statements about the future, such statements are forward looking and subject to a number of risks and uncertainties.