Absent any significant bad news on economic or trade fronts, global stocks resumed their upward climb for the year. While there were no major announcements, indications from the US and China suggested progress is being made toward a trade deal.
S&P 500: 2,822 (+2.9%)
FTSE All-World ex-US (VEU): (+2.9%)
US 10 Year Treasury Yield: 2.59% (-0.03)
Gold: $1,302 (+0.3%)
EUR/USD: $1.133 (-0.8%)
- Sunday – An Ethiopian Air flight crashed, killing all aboard and leading to a global grounding of the Boeing Max 8 and 9 models.
- Monday – The White House released a $4.7 trillion budget which would reduce social safety-nets and increase defense and border patrol.
- Tuesday – The Consumer Price Index rose a moderate 0.2%, suggesting inflation pressure remains subdued.
- Tuesday – British lawmakers rejected Prime Minister May’s proposed deal for a second time.
- Wednesday – British lawmakers voted against leaving the EU without a deal, extending a March 29th deadline.
- Thursday – The House passed a resolution calling for public release of Special Counsel Robert Meuller’s anticipated report on possible Russian interference in the 2016 election.
- Friday – A gunman killed 49 people at two mosques in New Zealand.
- Friday – China indicated it would cut value added taxes to spur growth and also indicated trade talks with the US were progressing.
For stocks, March got off to a slow start, but major market indexes are now back in positive ground. In contrast from January, tech stocks are once again leading the way. Way back in September, it seemed tech, and FANG in particular, could do no wrong. The sector was universally loved. Then, as tends to happen when there is too much love, it got hit hard in the Q4 correction. Many tech favorites dropped by a third or more.
When stocks started to rebound in January, tech participated at a slower rate. But since then it is leading again. Valuations in the sector probably got ahead of themselves last summer, and they may have over-corrected in Q4. Now they seem reasonable. Tech stocks remain more expensive than the rest of the market but also have higher growth. We don’t see as many extremes.
Interestingly, Microsoft is now the most valuable publically traded stock in the US at $890 billion. Apple has come roaring back and is a close number two, but we find it interesting that as the relatively new number one, Microsoft garners neither the attention nor passion of Apple or Amazon. That may be for the best. Microsoft is one of few companies who has managed to stay in the top ten for more than a decade. History has shown it is hard to remain king of the hill, and the biggest stock tends to underperform on a forward looking basis.
We believe it is important to manage sector and single-stock exposures to avoid having too much at risk when the cycle rotates. But at least for the moment, stocks are charging ahead and investors seem to have quickly regained confidence in the comfort of their favorite tech names.
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