7 in a Row – Monday Morning Market Memo – February 11, 2019

Good morning,

Well, it wasn’t much of a gain, but the .17% advance in the Dow Jones Industrial Average last week brought its consecutive weekly winning streak to 7. We mention the gain not because 7 is a lucky number, or because we began counting up the weekly winning streak at 5. Rather, the gain last week was notable because it showed market resiliency and the ability to shake off some bad headline news.

News regarding two major issues the stock market has been focused on of late – trade relations with China and the pace of global economic growth – had a negative bent last week. Remarks by President Trump that it’s “unlikely” he would be meeting Chinese President Xi before the March 1st trade deadline, and comments by his economic advisor Larry Kudlow that we’ve got “a pretty sizable distance to go” for a deal, brought the fear factor over trade back to front and center.

Additionally, the European Commission lowered its 2019 economic growth estimate for the euro area from 1.9 to 1.3 percent. For Germany, the economic powerhouse of Europe, the growth forecast was lowered from 1.8 to 1.1 percent. Considering these headlines, we think the modest gains seen by the three major indices last week were a sign of market strength. Of course, a week (or even 7) of gains, does not predict the future, and the market is still focused intensely on global economic growth and U.S.-China trade relations – and these remain risk factors.

In the week ahead U.S. trade representatives are headed to China to resume trade talks, and the markets will be focused on any progress, or lack thereof. Also, corporate earnings continue to roll in. Major companies set to report include Cisco Systems, Duke Energy, Coca-Cola, PepsiCo, Nvidia, Baidu, and Deere & Co. For the totals so far, with 66% of the companies in the S&P 500 having already reported actual results for the fourth quarter of 2018, 71% have reported a positive earnings surprise (which is equal to the 5-year average) and 62% have reported a positive revenue surprise (which is above the 5-year average), according to FactSet. As always, don’t hesitate to call us with any questions or concerns you may have.