Goodness Gracious

Jerome, Jerome. Dear Mr. Fed Chairman. If you had talked in the same fashion in early December as you articulated Friday about your new found patience and strong suggestion that you have no preset path to raise interest rates you would have saved investors a lot of pain and anguish (not to mention about 2,000 DJIA points). Yes, words and how you put key thoughts together can be very meaningful in a market environment where investors are shaken by global economic weakness, a trade war with China, and previous statements about autopilot rate increases and balance sheet activity. This was a big change for Mr. Powell and the Federal Reserve to tell investors and market strategists that they are listening and watching market signals that tighter monetary policy, reduced liquidity, and growing recessionary fears are spoking investors. This change of heart and language means that long term investors can now take Fed fears of unwarranted rate increases off the table which is good news and removes one of the major uncertainties we were confronting moving into 2019.

Another important announcement Friday was the strong employment data with upside surprises in payrolls and wage growth including a rising participation rate. This announcement plus Powell’s comments later Friday morning sent stocks higher with more authority we haven’t seen for several months. For the week, S&P 500 Index was up 1.9% and the technology heavy NASDAQ was up 2.3%. Importantly, oil came off the mat and was up every day last week and may be stabilizing from its recent dramatic decline.

This week starts with several very important conferences that have shown an ability to move stocks with unexpected announcements and talking points. First, the granddaddy of healthcare conferences begins Monday with the highly-anticipated JP Morgan Healthcare Conference in San Francisco. With the news last week that Bristol Meyers Squibb is acquiring Celgene interest is spiking that other mergers and important joint ventures will be announced. With the recent correction in many healthcare stocks I believe the potential for value enhancing deals is higher this year and I expect some exciting news. Next is the important annual Consumer Electronics Show with keynote talks from Jack Dorsey (TWTR), Dr. Lisa Su (AMD), and Ginni Rometty (IBM/Redhat) and Verizon CEO Hans Vestberg. I will be paying close attention to new announcements and plans for 5G spectrum buildout which is getting closer and will start to be employed later in 2019.

I totally understand that we have many challenges ahead but I feel better that the Fed concern is not part of the equation for now. That means we can breathe a little and actually look at companies again for money making ideas.

Have a great week,

Roger N. Steed

January 7, 2019

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