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March, 2018

The Market

  • During January, equities experienced the best market returns for that month in nearly 25 years. (CNBC). So goes January, so goes the year, 88.9% of the time. (Mike Gibbs, Raymond James)
  • The S and P 500 gained 5.8% for the month (Mike Gibbs, Raymond James)
  • During February, market volatility returned. The S and P 500 has had 11 trading days that have resulted in at least a 1% total return “gain or loss” in the last 20 trading days through Friday, 1.23.2018. Before that, the S and P 500 had 11 trading days that resulted in at least a 1% “gain or loss” in the preceding 305 trading days (BTN Research)
  • As of 2.23.2018, the S & P 500 is down 2.5% month to date, with 3 trading days remaining this week in order to avoid its first negative month since October, 2016.

Overall, from the positive side of the ledger; there is decent global economic growth ahead, good earnings opportunities around the world, potential benefits from tax reform for consumers and for corporations, continued confidence from consumer and businesses, historically low interest rates, and a weak dollar helping U.S. companies doing business abroad. (Day Hagan Asset Management)

On the negative side; somewhat expensive valuations, interest rates creeping higher (though still relatively low), central banks around the world are beginning to normalize monetary policies (though still accommodative overall),

very minor inflationary pressures, and continued political and cultural risks. (Day Hagan Asset Management)

Corrections actually do happen during bull markets, though you wouldn’t know it by the market’s steady advance over the past year or so. Since 1900, according to Ned Davis Research, the largest Dow Jones Industrial Average correction in each of the bull markets during that period has average -11% over 38 days. The last was from 4.20.2016 through 6.27.2016 when the DJIA fell -5.3% over 68 days. Corrections are normal. (Day Hagan Asset Management)

We do believe that the market has entered into a new phase of volatility. We also believe that interest rates will be higher at the end of the year than they are now. However, interest rate moves are very difficult to predict. The Federal Reserve has signaled that there may be at least 3 Federal Reserve inspired interest rate hikes during this calendar year. We believe that it may be likely that these will occur, because we think that the U.S. and International economies are improving. We remain bullish and optimistic about the equity markets and side with Raymond James strategist Jeff Saut, who contends that we are in the midst of a long cyclical bull market, with years left to move higher.

Due Dilligence

During the month of January we either participated in conference calls, or personally spoke with portfolio managers or their representatives from the following firms.

  • Mike Gibbs. “Ticker Talk” Raymond James
  • Day Hagan Asset Management
  • Clearbridge Investments
  • NewSouth Capital Management
  • WestEnd Advisors
  • Southern Sun Asset Management

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