The End of the Holiday By: Gabriel PotterMBA, AIFA® 2019.02.20

Individual investors who spend their time focused on news cycles might be forgiven for thinking that the stock market was in a bit of a rut; it wasn’t that long ago that the December and October sell-offs were grabbing many of the headlines.  In fact, institutional investors who get their quarterly reports might also be forgiven for being a little pessimistic.  After all, institutional investors are getting their results based on asset balances as of 12/31/2018 – a near bottom of the recent-sell off. 

If you ever wanted proof of schizophrenic market behavior, the past 6 weeks have really shown it off.  While the fourth-quarter sell-off was informed by pessimism on trade negotiations with China and budget disputes, they were largely based on presumptions of what *would* occur.  Today – February 20th if we’re being precise – we’ve lived through the longest partial government shutdown as a result of that budget dispute, however the market has been moving up based on earnings data which occurred in the 4th quarter.  This is one of many reasons we avoid short term market predictions.  Market sentiment doesn’t adhere to replicable criteria, so estimates are often futile. 

More specifically, the market was focused on the future indicators in December, but focused on lagging data results today.  Despite the commerce department warnings on retail sales, key store earnings results have been acceptable through December.  For instance, Wal-Mart just reported better than expected holiday earnings, with strong e-commerce resilience.  Moreover, trade-negotiation reports have been positive, so blue-chip stocks have markedly advanced despite the kerfuffle in Washington.  The S&P is up 11% year-to-date after 8 straight weeks of market gains.  We haven’t reached October 2018 highs, but we’ve recovered the bulk of the 4Q damage with few positive forward-looking indicators.  Eventually, we’ll reach the end of 4Q holiday data and have to look at 2019 results, but (for now) investors have been placated temporarily with a rosy past to look back on.

 

 

 

 

 

 

 

 

 

Gabriel Potter

Gabriel is a Senior Investment Research Associate at Westminster Consulting, where he is responsible for designing strategic asset allocations and conducts proprietary market research.

An avid writer, Gabriel manages the firm’s blog and has been published in the Journal of Compensation and Benefits,...

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