Last week was packed with news from President Trump discussing foreign policy with Chinese President Xi Jinping to Jeffery Lacker resigning from the Federal Reserve Bank and the Fed Minutes telling us a little more than usual. How could these stories affect your investments? Get all the details in this edition of Steady Investor’s Week…
Strong Returns for U.S. Equities in Q1 – the S&P 500 had a strong quarter. In the three months ending March 31, the index rose 6.1% (with dividends reinvested) while the NASDAQ posted a blistering 10.1% gain. The sectors that seemed to benefit the most in Q4 from the “Trump Trade,” i.e. Energy and Financials, were among the weakest performers in Q1. Cyclical forces could be at work, but it also could be a sign the market is recalibrating its expectations for legislative change affecting both sectors. It was also curious to see that most of the S&P 500’s gains on the quarter came in January and February, as the new administration came into office, but then faltered in March as the realities of the legislative process perhaps set-in. The best performing sectors for the quarter were Technology (+10.6%), Consumer Discretionary (+8.4%), and Health Care (+8.4%).
Eyeing the French Elections – the developed world will be watching later this month as French citizens take to the polls in their national elections. In the Dutch elections earlier in the quarter, populist candidate Geert Wilders performed poorly, giving Euro-supporters a sigh of relief that the Brexit, anti-globalist movement seemed to have stalled. In France, the far-right candidate Marine Le Pen is the populist candidate to watch. A victory for her would signal that France is next up on the EU chopping block. On Sunday at a political rally, she said she would remove “the shackles of the common currency” and restore France’s monetary sovereignty. Therefore, she most likely would move to leave the European Union. From an economic and security standpoint, our view is that this is not the ideal way forward for France or Europe. The free trade zone and common currency has its faults and needs refining, but dismantling it would severely affect free trade and ultimately the cost of goods.
Richmond Fed President Suddenly Resigns – the Richmond Fed President, Jeffrey Lacker, suddenly resigned this week amidst a scandal that involved the leaking of confidential information to a financial analyst. Rules prohibit a Fed president from revealing any of the closed-door information discussed at policy meetings, and Lacker resigned on his own accord after realizing what he did violated those rules back in 2012. In all likelihood, Lacker did not reveal any information in exchange for money or a bribe, and probably discussed sensitive information incidentally.
And the Winner is…..Amazon – this week marked a series of bids amongst tech companies, Twitter, Google, and Amazon, over an NFL deal for rights to stream NFL games. The deal was set at a cool $50M, and allows Amazon the ability to stream 10 Thursday night NFL games this upcoming season. The games will still be broadcast on CBS and NBC, but the NFL clearly has interest in expanding its reach into digital platforms.
President Trump Met with Chinese President Xi Jinping – Wall St. and foreign policy wonks are very interested in President Trump’s weekend meeting with China’s Xi Jinping, as the leaders of the #1 and #2 economies in the world discuss trade imbalances, “currency manipulations,” the Paris climate deal, and perhaps most importantly, North Korea’s nuclear program. North Korea may take priority over economic issues, as there appears to be no way forward without China’s cooperation. Market watchers will be scrounging for insight into how the two leaders interact, for clues about how the relationship unfolds from here.
Fed Minutes More Telling than Usual – minutes released from the Fed’s March meeting showed that board members are starting to suspect equities are entering high valuation territory. It also showed agreement to start shrinking the central bank’s $4.5 billion balance sheet, both of which point to consent that tightening will occur throughout the year.
While Q1 proved to have Strong Returns for U.S. Equities, we are reminded how important it is to stay focused on key factors instead of getting caught up in headlines. Many times, investors can give more weight to news stories as opposed to economic indicators. To help you keep an eye on important fundamentals that could impact your investments, we invite you to download our Stock Market Outlook report. See predictions for where the S&P 500 is heading, small cap vs. large cap returns, growth, unemployment, and much more. Click on the link below to download your free copy today: