Highlights
• Stock prices have risen 20 percent since their low in late December, to the point where we think they are fairly valued.
• Markets will likely enter a near-term consolidation phase to allow growth expectations to catch up to prices.
• We think markets present long-term opportunities, but it will probably be wise to remain tactical in this environment.
Last week saw mixed economic data, continued progress on the trade front and ongoing domestic and global political uncertainty. Markets were somewhat listless in this environment, with U.S. stocks rising slightly for the week.1 The biggest winners were technology and financials, while materials and defensive sectors sold off.1 In general, we think markets are fairly valued and expect the current bull market to persist, but also expect a near-term consolidation.
Weekly Top Themes
1. Fourth quarter real gross domestic product growth was better than expected. The economy grew 2.6 percent last quarter, with a year-over-year gain of 3.1 percent.2 Consumer spending rose for the third consecutive quarter, while capital expenditures also accelerated.2
2. U.S. manufacturing is showing signs of trouble. The Institute for Supply Management Index dropped sharply in February, showing that U.S. manufacturing has been hit by the broader global industrial slowdown.3
3. U.S. economic growth should improve. Evercore ISI offered a list of reasons why:4 stocks have bounced back, credit spreads have narrowed, the shutdown is over, unusually cold weather has passed, employment is rising, wage growth is accelerating, household formation is improving, inflation remains tame, monetary policy is accommodative and tax refunds are rising.
4. U.S. economic growth should improve. Evercore ISI offered a list of reasons why:4 stocks have bounced back, credit spreads have narrowed, the shutdown is over, unusually cold weather has passed, employment is rising, wage growth is accelerating, household formation is improving, inflation remains tame, monetary policy is accommodative and tax refunds are rising.