Market Commentary

March 27th, 2019
By now, every person that either has a TV, smart phone or computer has an opinion on the released “Mueller Report” and so does the market, it rallied after the news. In my professional opinion, I don’t focus on the subject when the impact shouldn’t be eventful towards the market, but recently, I have focused on their effects on the psyche of investors.
On Dec 23rd, the stock market reached a boiling point, and some investors were ready to throw the baby out with the bath-water. However, since that point, the market has been on a race course trying to recover the damage done by a correction that lasted about two months. The Federal Reserve had been taking an aggressive view of the global and U.S markets, and the possible need to raise rates multiple times to “cool down” the economy late in 2018.
Then a mood change occurred in early 2019, and now a new posture from the Federal Reserve has arisen. According to Chairman Powell, one rate increase may be needed, and the possibility of a rate cut in 2019 is not out of the question, and this has the market spinning like a top.  Has all the new data points led to this turn-around in thinking for the Federal Reserve in 40 days?
While I felt comfortable with my views of the market for 2019, when I wrote my report to clients in December,  I had some areas of concern and the Federal Reserve’s aggressive opinions of the U.S economy and the word “Recession.” However, too much emotion has swept into the market with different issues, and even a new message coming from the Federal Reserve has me pausing once again about the market for 2019.
Can we go much higher? Could we see a pullback again and will it lead to a new rally?
The S & P 500 is up about 12%, and the Nasdaq is up about 16% year-to-date, and we still have about two days left in the quarter. Most investors would be happy with these returns for an entire year, but they have gotten them in three months. During this point, I have seen stocks move up 25% percent to over 125% from the December lows to present. The question is why? Sometimes it does pay to question good luck and not just blindly accept it.
Some further signs the market is getting too emotionally compromise is the gyrations caused by little to no news. As talks of a potential deal being close in the China/U.S Trade talks in early Jan and Feb, the market started moving upward and has sustained the momentum that a deal is “imminent.” Is it really?
The cloud hanging over the White House seems to be drifting away with the release of the Mueller Report, and once again the markets rallied. But are things going to get better in Washington or just moving to a new phase? These are all emotional events and have had no real impact on the substance of corporate earnings and what is truly moving the market and stock prices.
Should a deal with China and the U.S get done, there may not be a strong move in the markets since we are seeing it now. Once all the big news is over, then we are back to earnings and what is happening with these companies and the rest of the financial markets in the world.
The yields on the 10 and 5-year bonds have dropped below their high levels last seen in late 2018. If the Federal Reserve does nothing with rates or even surprises the market with a cut, is that a good thing??? If an investor is investing in fixed income, the answer is no.
Investors need to understand why the market is performing the way it is and understand what is motivating the markets. There have been some lessons learned in the markets in 2016, 2017 and 2018; don’t forget the lessons.
Disclaimer:
These are the views of Aurora Strategic Advisors, LLC (ASA), and should not be construed as investment advice.
This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.
Neither the ASA nor the named Broker dealer or Investment Advisor gives tax or legal advice.
Please consult your financial advisor for further information.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.