We’ll start today off with a great big “HAPPY ANNIVERSARY!” to my beautiful and talented wife, Chanelle.
This is #6… of infinity. I look forward to all the rest, but I am most thankful for today! We are totally the couple where strangers look and say “Jeez, how did that happen?” She’s way out of my league and I am a lucky guy!
On to the markets, which have been mostly positive over the past couple weeks. The S&P 500 is up 2.24% for the month through Friday, and the Russell 2000 Index is up almost double that, at 4.44%.
The big story so far this month is the shift from growth (or momentum) stocks, to value. Boring utilities and consumer staples have taken the wind out of the sails of the high-flying FAANG names this month in a sign that investors have become more cautious about valuations – at least for now. It’s something to note and keep an eye on.
You can see some evidence of this in the Nasdaq lagging other major indexes this month, only up 1.94%.
Since my last note, the Federal Reserve dropped the shortest interest rates by 0.25% at their meeting last week. One Fed Governor voted against the action in favor of a larger 0.50% cut, and 2 others preferred no cut at all. There seems to be some disagreement within the Board which should lead to some uncertainty in the near term. I continue to see Mr. Bullard’s actions as an application for the job as the next Chairman of the FED. President Trump wants cuts, and Mr. Bullard seems more than willing to play ball. Time will tell.
Current Fed Chairman, Jerome Powell said at the news conference following the meeting:
“I do not think we’d be looking at using negative rates, I just don’t think those will be at the top of our list… If we were to find ourselves at some future date again at the effective lower bound, again not something we are expecting, then I think we would look at using large scale asset purchases and forward guidance…”
I couldn’t help but immediately think of other government appointees who said things that turned out to be wholly untrue, in the long-run. Such as when the Secretary of the Treasury, Henry Paulson told us all:
“Our financial institutions are strong.”
…back on 3/16/2008 – we all now know how that turned out.
Beyond the FED meeting, the other market moving news item was the drone attack on Saudi oil fields which sent the price of crude oil soaring by around 20%. You will likely see some increases at the pump at least in the near term. It seems that the impacted production will be coming back online faster than initially expected though, so crude has given back most of those initial gains and sits at $58/barrel today. Part of me wonders if the Saudi’s are telling an overly optimistic story to keep the IPO of Saudi Aramco on track. This IPO has been in the works for years now and this incident isn’t helping the pricing scenarios.
Before I wrap-up, one item of housekeeping for clients: we have disabled the gain/loss tile of your performance portals at least temporarily, while we try to understand why the data feed isn’t providing the information we expect. We will be working hard to get it back up and running for clients who have portfolios at custodians other than Interactive Brokers.
Cheers – and thanks for reading!
Shane Fleury, CFA
Chief Investment Officer
Elevate Capital & Elevate Ventures
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