Broker Check

I Wonder

Investors remained focused on company fundamentals last week, responding to better than expected earnings reports from NVidia, Cisco Systems, Waste Management, and PepsiCo that allowed the markets to keep the uptrend in place as the S&P 500 Index finished 2.5% higher and the NASDAQ rising 2.4%. With earnings season winding down market skeptics have been calling for a pullback from the nice rebound since late December over the last few weeks but earnings and encouraging commentary regarding China trade talks have given investors courage to stay engaged and respond to company data. Investors will be tested again this week with major disagreements in Washington and China negotiators coming to Washington for more talks on trade issues.

I wonder if the noise from Washington will finally disturb the nice rally we have enjoyed thus far this year. My attitude is that the market can rally higher if we don’t get flooded with sizable IPOs (stock offerings) that have historically swamped the market with too much new stock that has to be absorbed by investors. Any slug of new offerings could change the leadership for a considerable period with the technology sector feeling the brunt of the onslaught while industrial, energy, and material stocks benefit from any trade truce with China. I will watch and monitor for any shifting winds that start to swirl and warrant attention. It will certainly add a new element for the market watchers to ponder.

Finally, interest rates remain relatively calm which is a bit of a surprise. The fear of rates rising has certainly been quelled by the Federal Reserve recently but additional economic fears from Europe and Asia likely play a larger role in supporting Treasury prices and keeping them relatively attractive to global investors. This has allowed other rate sensitive groups like REITs to trader higher and provide a nice parking spot for investors like me that don’t trust corporate bond rates will remain well contained for a longer period of time. Again, diligence is warranted to make sure rates remain calm and investors can comfortably remain in other bond market proxy investments that generate income.

Overall, now is a pretty good time to maintain a balanced portfolio of stocks, income generating securities, and an ample amount of cash for new opportunities that are bound to pop up.

Have a great week,

Roger N. Steed

February 19, 2019

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