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Alright, today the first quarter GDP is out and it is (wait for it, drumroll) up .2%. This was below even the low side of expectations as many thought 1% would be the target.
A number like this won't have me throwing in the towel on the economy but I have written before about the cheerleaders in the market saying "everything's fine". Well fine isn't up .2%
In addition, core capital goods orders (durable goods orders without transportation) are down for the seventh straight month (Investors Business Daily Monday 4/27/15).
Sure our unemployment numbers appear to be "okay" but job participation is low right now. So this supports my view that we still have a number of speed bumps evident in this economy. This recovery cycle is not historically normal and we will have to continue to be vigilant in our investments given that we see risk in this macro picture.
When I look at individual stock issues I get somewhat of a mixed bag also. If I look at the leading stocks in the S and P100 YTD (Worden Brothers Charts 1/2/15 to close 4/28/15) I see this: Amazon, Starbucks, Halliburton, Apple, then Disney. So what's the theme here?
Perhaps it is a trend in consumer stocks, right? Yes, but then Walmart is down 8.53% for the year. Could it be energy and oil as Halliburton seems to indicate? Perhaps, but National Oil Well is down 22.26% so far this year.
To me there is not yet true leadership here yet and such leadership to me signifies a completely healthy market.
I have been looking at the financials as a possible "next leader" but so far this year only Bank of New York (BK) has a return higher than the market return for the S and P100. So no leadership here, yet.
In another development April 27, 2015 Twitter got pounded for coming in with lower than projected revenues and now people are questioning their profit model and future earnings.
You may see this impact on some other social media stocks as well.
In biotech, Biogen got hit a bit on lower returns for the Alzheimer's drug.
These two developments are certainly to a degree company specific, but what I also see is that some people would like to take some risk off the table here. Given the backdrop I don't think that is a bad play.
So my thinking, again, be prepared if we get a pullback. I do not see Armageddon at all but it does feel like the market is trying to make up its mind here. I am inclined to let it ;-)
TECHNICALS
In looking at the market indexes - Dow Jones 30,
S and P 500, S and P100 - you see similar patterns. We are right now bound in a specific range. The chart below shows you where I see the high side breakout and the low side breakdown for the Standard and Poor's 500 Index.
Source: Wooden Brothers TC 2000 Software Data
This has happened roughly since February of this year and may have a little while more to go.
A range bound market just confirms the picture I create when I look at the fundamental data.
We are still mostly invested in our positions here but I am very aware of the downside risk that is present. I am looking now for technical breakdowns in individual stocks and if this happens we will just build our cash position.
In essence, this is an environment to be protective and not necessarily push for upside returns.
If you are adding money a little bit at a time each month for the long haul then I think you are fine. But if you have some large positions then start watching them like a hawk - at least for right now.
Cheers,
Tim
Tim Withers is Chief Investment Officer of MSW. He has over 20 years of experience managing money on both an asset allocation and tactical basis for clients as well as serving as investment analyst to qualified retirement plans and individuals. He holds a BA from Connecticut College and an MBA from the Wharton School at the University of Pennsylvania. Disclosures: S&P 100 Index is an unmanaged, market-capitalization-weighted index representing 100 major, blue chip stocks representing diverse industry groups. S&P 500 Index - is an unmanaged group of securities considered to be representative of the stock market in general. You cannot directly invest in the index. "Asset allocation does not protect against loss of principal due to market fluctuations. It is a method used to help manage investment risk." The Morgan Stanley Capital International Europe, Australasia, Far East (EAFE) Index is a widely recognized, capital-weighted, unmanaged index of over 1,100 stocks listed on the stock exchanges of various non-U.S. countries. Securities and Investment Advisory Services offered through NFP Advisor Services, LLC (NFPAS), member FINRA/SIPC, NFPAS is not affiliated with MSW Financial Partners. The above links are provided for your information only. As they are provided by third parties, NFP Advisor Services, LLC (NFPAS) does not endorse, nor accept any responsibility for the content. NFPAS does not independently verify this information, nor do we guarantee its accuracy or completeness. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. It is not guaranteed by NFP Advisor Services, LLC for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. The indices mentioned are unmanaged and cannot be directly invested into. Past performance does not guarantee future results. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the US stock market. |
