Market Commentary 3/27/19

The positive start in the stock market last week reversed on Friday (03/22/19) to bring the major indices into the negative for the week, with the Dow down 1.3%, the S&P 500 down 0.8%, and the Nasdaq down 0.6%.


This end-of-the-week decline was felt worldwide – indices in France, the UK and Germany all fell about 2% on Friday – and could be due to signs of a slowdown in global economic growth. For example, Germany’s economy is the largest in Europe but German manufacturing activity has recently fallen to its lowest level in over six years. One immediate result has been that the yield of Germany’s 10-year government bond fell into negative territory for the first time since 2016. Specifically, the yield is –0.023% (; 03/25/2019).


  • GDP growth for 2018 currently stands at 2.9% but after the typical revisions over the next few months, the final number may be about 3.08%.
  • The DOL reported the number of Americans filing for new unemployment benefits last week fell by 9,000 to 221,000 (234,000 new filers were expected). Continuing claims, which counts the number of people already receiving benefits, fell by 27,000 to 1.7 million, compared to an average of 2.3 million for the past three years (Sherman Sheet; 03/25/2019). And the current 3.8% unemployment rate (i.e., 6.235 mill unemployed out of a labor force, as of February, of 163.184 mill) is a 50-year low.
  • While manufacturing growth has slowed slightly, according to the Commerce Department’s Factory Orders report, factory goods orders were up 0.1% in January, after rising the same amount in December (Sherman Sheet; 03/22/19).
  • Prospects of a comprehensive US-China trade agreement appeared to improve last week as the sides agreed to another round of talks. According to the Wall Street Journal, the two sides continue to make progress, with a final deal expected by the end of April (; 03/19/2019).
  • Relative to the stock market, key fundamental measures such as price-to-earnings ratios, earnings growth rates and return on equity, are generally good.

The Stock Market:

… has been in a malaise for the past six months, with the S&P unable to break through its 2,931 high of 09/20/18?

To large degree, the answer is the same as always – uncertainty. The market hates uncertainty and in the past six months we’ve had internal uncertainty from the Fed and external uncertainty viz a viz trade with China and a slightly slowing global economy.

The Fed:

Last week, in a departure from its earlier forecasts, the Fed now forecasts no interest rate increases this year and only one in 2020. Chairman Powell concluded that the central bank can be “patient” (Fed-speak for not raising interest rates) because the economy is growing at a steady pace, unemployment is low, and inflation is tame. This is significant considering the background. You may recall that early last fall, on 09/26/18, Chairman Powell indicated there might be as many as three rate increases in 2019; this was at least part of the reason for the stock market’s decline in the ten weeks beginning a few days after Powell’s statement (; 09/26/2019).

Then, on 12/19/18 the Fed announced there would be no more than two increases in 2019 but the damage was done, and the market continued falling to its low of 12/24/18 when the S&P 500 was down 20% since September 20. The president then opined – in a Christmas Day appearance in the Oval Office – “They’re raising interest rates too fast” (Pres-speak for, “Enough already … stop with the raising rates talk”) and a few days later (01/04/19) Powell said they would be more “flexible” (more Fed-speak for not raising rates). Since that January 4 statement the market gained 9% but the Dow is still over twelve hundred points from its early October high (Federal Reserve Economic Data; 01/04/2019).

The Global Economy:

In January the International Monetary Fund and the World Bank predicted that global GDP growth would be slower in 2019 but this may turn out to be a large ho-hum because the projection is for 2.9% growth in 2019 compared to 3.0% in 2018 (; 03/25/2019).

Charts 1 and 2 tell the story.

Going forward …

We continue to be cautiously Bullish about US equities (Bearish RE international equities), while admitting that advances in 2019 will be moderate.

Wayne Copelin, CFP®

President, Copelin Financial Advisors, Inc.

514 Brooks Street

Sugar Land, TX 77478

Phone (281) 240-2902

Fax: (281) 240-2856

Securities offered through ProEquities, Inc., a Registered Broker-Dealer and Member FINRA & SIPC Advisory Services offered through Harvest Investment Services, LLC., a Registered Investment Advisor Copelin Financial Advisors, Inc and Harvest Investment Services, LLC are independent of ProEquities, Inc.


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