S&P looks to continue winning streak. Yesterday’s modest gain for the S&P 500 Index gave the index its sixth consecutive higher close, something it hasn’t done since coming off the market bottom in February 2018. The recent climb above the January 2018 highs is technically significant, and leaves the index only 2% below the all-time closing high set on September 20. While the strength in equities is encouraging, we would remind investors that the last 3 months have experienced the largest percent change since the 2009 lows, which places it in the 99th percentile of all observations since 1950. This helps to affirm our overall neutral view of equities, while still maintaining our year end fair value estimate of 3000 for the S&P 500.
Job growth rebounds. The economy added 196K jobs in March, easily topping the consensus forecast of 177K and bouncing back from weak job growth in February. The strong rebound signaled that the February slowdown was likely an aberration and a healthy labor market should continue to support economic growth. The unemployment rate held steady at 3.8% and wage growth slowed, missing expectations, but remains at a healthy 3.2% year over year. Moderating, but still solid, wage growth should help limit inflationary pressure and give the Federal Reserve leeway to continue to take a wait-and-see approach. The labor market remains robust for this point in the cycle, and while we expect job growth to slow, the labor market should provide a strong foundation for continued healthy consumer spending.
U.S., China agree on trade deal text. After significant back-and-forth over the past month, top negotiators reached a consensus on the draft of an economic and trade deal. The broad strokes indicate China will have until 2025 (with benchmarks along the way) to meet its commitments on commodity purchases, and also permit U.S. firms to wholly own enterprises in China, while the U.S. could retaliate if China fails to meet its commitment. This meaningful progress is encouraging and supports our continued belief that a formal deal will come to fruition in the relatively near future, though President Trump recently said it may take four weeks for a formal deal framework and another two weeks for details to be put to paper, and those details include some of the largest hurdles such as intellectual property and enforcement.
- Nonfarm Payrolls (Mar)
- Unemployment Rate (Mar)
- Japan Leading Index (Preliminary Feb)
- Japan Coincident Index (Preliminary, Feb)
- Germany Industrial Production (Feb)
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Index data obtained via FactSet
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