February was a positively solid month. The results for February were: Dow +3.97%, the S&P 500 +3.55% and the NASDAQ was +4.65%. Since the highs in the Fall 2018, the Dow is still down 2.32% however, the S&P500 down 4.38% and the NASDAQ is down 5.65%. Two solid months have occurred, nonetheless, and a third likely to be forthcoming in March. Year to date, the DOW is up +12.84%, the S&P up +12.97% and the NASDAQ has gained +16.61%
Economically, we still see no factors which suggest the overall expansion is ending. GDP was positive in February and remains at an annualized +2.5% rate according to Kiplinger; inflation remains muted at the FED target of just under 2%, but is starting to slightly accelerate as tightness in the labor market is tending to push wages higher. Consumer confidence, as well as business and consumer spending remain positive although some lessening is beginning to appear. Jobs are increasing being created and corporate earnings are very strong. The “Tariff Wars” continue to subside, and the trade gap narrowed significantly in February. The recent address by Chair Powell and follow-on appearances has had a tremendously positive effect in claiming markets. Rate changes in the next six months are unlikely, and we believe there is a chance for two increases after June 2019. The FED seems committed to a cautious, data-driven policy process.
As we enter March, we feel that this will be a positive month, with strength in the first two weeks and weakness in the last two weeks, similar to February. The historic probabilities are 63% for the Dow and the S&P to be positive; the NASDAQ probability is 62.5% and the probability for the smaller capitalization Russell 2000 is 72.5%. March will likely lead into a good April. 2019 should be a solid year but signs are likely to appear indicating a “slow down” is in progress. A slowdown is not bad just normal. We see major political problems becoming less disruptive despite a split Congress, however, there will remain unsymmetrical cross-currents which will result in some volatility during periods of market weakness.
These are the opinions of Crescent Wealth Counsel and are based on information from sources believed to be reliable, however, these opinions may change as information becomes outdated. Indexes mentioned are unmanaged and cannot be invested in directly. Past performance does not guarantee future results.