Market Commentary

 

 

 

NOVEMBER 2019

 

 

Everybody grab some popcorn, it’s turning into a great show. Markets continued to push higher this month, and in fact have broken out to all time highs. It certainly is a head scratcher for professionals as weaker earnings reports and shaky economic data are met with more frenzied buying. Why, you ask? Because poor fundamentals without a full-blown recession means that the Federal Reserve will continue to cut interest rates and help investors out of the slow period. This is where bad news is met with higher prices. It makes for some shaking heads around the office, but no one ever said that markets are always rational. In fact, there is an old quote by John Maynard Keynes. “The market can stay irrational longer than you can stay solvent.” This is precisely why we have advised caution and took some risk off the table and have not suggested running away from the markets.

Economic data for the month was mixed as Gross Domestic Product (GDP) came in at +1.9% versus expectations of +1.6%. Payrolls added 128,000 jobs, better than the 89,000 expected. And finally, retail sales were down -0.3% compared to expectations of +0.3% higher. We continue to see softer economic data, and company earnings are beating very low expectations. If you don’t expect much, you might be pleasantly surprised. We definitely saw this in earnings as many companies were rewarded with rallies on lower earnings that weren’t as bad as analysts thought.

Below we see the last three years of trading action in the S&P 500 Index. The very choppy market is making every effort to try and break out of the range. We certainly wouldn’t want to argue with the market, but it does seem rather questionable given the economic and earnings background. We would continue to advise readers to lighten up on positions as we move higher. Once again, not time to run away at all, but a great time to take your foot of the gas just a bit. With so many items up in the air (China trade, Fed policy, slowing global growth, elections, etc.), it could end up being a bumpy ride.

 

 

 

 


Disclaimer: Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of securities. Investments involve risk and are not guaranteed.