T2 Asset Management



2 Trans Am Plaza Dr., Suite 200
Oakbrook Terrace, IL 60181





Market Commentary




For those of you that found the 2019 Super Bowl the most boring of all-time, you can find plenty of excitement in your brokerage statements for the last few months.  When we last wrote in December, we had cautioned that the market was at risk of a further sell-off and boy was it ever. December ended as one of the worst months in the history of the stock market with most of the indexes plunging nearly 10% for the month. It seemed that the cause was a tone-deaf Federal Reserve that was talking about continuing to raise interest rates despite the growing chorus of concern amongst market participants. Well, what a difference a month makes! At last week’s Federal Reserve meeting, Chairman Jay Powell struck a different tune by not raising rates, and in fact, back-pedaling much of the hawkish talk we had heard over the last 6 months. As the chart shows, this action was likely predicted by the markets as we saw a rapid recovery since the December lows.



For the month, economic trends continued to be strong, and in fact, were quite a bit better than many had expected. Retail sales came in at +0.2%, Gross Domestic Product (GDP) remains strong at 3.4%, but the real whopper was the non-farm payrolls. Analysts were expecting growth of 165,000 jobs and were rewarded with almost double that at 304,000. There were some downward revisions to prior months, but still, it seems the economy is on very solid footing.


Earnings season got under way last week, and so far, things have been okay. There were many that have been predicting a coming recession, and it seems that they may be, at the very least, premature. Earnings so far have not been the blowout numbers that we had seen the last few years, but they are growing. Ultimately, it is very difficult for the market to melt down completely without the prospect of much lower earnings reports.


So, where does the market go from here? At the moment, it is fairly unclear. Earnings are slowing from where they had been but are still positive. The economy has a lot to worry about with potential trade wars, government shutdowns, etc., but we seem to be on solid footing. In fact, it is always informative to note that the market cares far more about what the Federal Reserve says and does than it cares about politics. So right now, it is wait and see. We would not be making any large moves until we have further evidence regarding the direction of interest rates. If we start to see a few months of higher inflation that would cause the Fed to move, it would be concerning. Until then, it’s just sit back and wait.




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.