After a record hot start in the first two months of 2019, U.S. stocks cooled off during the first week of March.
Slower economic growth prospects around the globe this week caused global investors to take some risk off the table and shift buying into bonds.
On Monday, China lowered its 2019 GDP growth expectation to 6%-6.5%. The country’s economy grew 6.6% in 2018, which was its slowest rate in three almost decades. Later in the week, China said that exports fell more than 20% in February, marking the worst performance in nearly three years.
On Thursday, the ECB reinstated its targeted long-term refinancing operation (TLTRO), to help stimulate economic growth in the region. Despite several years of low and nearly negative interest rates, GDP estimates have been coming down in recent months for Europe’s leading economies.
Back at home, the February jobs report on Friday laid an egg. Only 20,000 non-farm payrolls were added in the U.S. last month, compared with expectations for 180,000 new jobs. This disappointing result follows two months with big upside surprises, so the underlying trend remains unclear.
Quiet on the Earnings Front
Kroger (KR) was a big earnings-related mover this week, falling 10% a day after quarterly revenue and profit both fell short of expectations.
Looking ahead to next week, the earnings calendar is relatively light, save for a cluster of notable names reporting on March 14. It’s worth noting that each of the four companies are expected to post positive profit growth this quarter.
Bull Market Turns 10
March 6 marked the 10-year anniversary of the market bottom during the Financial Crisis. Howard Silverblatt of Standard and Poor’s marked the occasion by calculating that over $20 trillion of investor wealth (including $3.3 trillion of dividends) was created over the ensuing Bull market, which works out to a 17.7% annualized total return.
There’s an old investing adage that “Bull markets don’t die of old age” and we’re not calling in the coroner yet on this one, but there are a couple of interesting market indicators we noticed this week that suggest gains could be harder to come by in the near term.
First, the Dow Jones Transportation Index, generally seen as leading indicator, recently dropped 10 straight sessions. That’s the longest streak in a decade, tying a previous record.
In addition, the Chartcraft Investors Intelligence survey of newsletter writers has seen bullish sentiment increase nine straight weeks, to 52.9%.
This figure is noteworthy for a couple of reasons. For one, that’s the longest consecutive streak for increased bullishness in over 20 years. For another, this reading is seen as a contrarian indicator, with levels over 50% indicating a “sell” signal.
The current Bull Market will end at some point, but speculating about the exact expiration date can cause unnecessary worry for the average investor.
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