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Daily Blog

Friday, April 3, 2020

It is bad — no, it is ugly — with 6.6 million individuals filing for unemployment on top of the week prior of 3.3 million. The monthly nonfarm payrolls report was anticlimactic, reporting a loss of 701,000 jobs with the unemployment rate rising to 4.38%; but we know that almost certainly, this will be far uglier for the April report in early May. The March ISM Manufacturing headline reading dropped only by a point, but the new-orders component dropped by seven points. Where the manufacturing hit really showed up, however, was in the Dallas Federal Reserve manufacturing report, which plummeted to -70. Dallas is the epicenter of the disaster in the oil patch — more on this later. The coronavirus is wreaking havoc on the United States and our friends overseas in the most horrific ways that I have witnessed in my lifetime. So yes, it is ugly, uglier that imaginable a few short months ago.

But there is good news too. Yes, we know that the U.S. government, states, municipalities and especially our first responders are all in. if you are not directly impacted, then find a way to help. I discussed the other day that the United States is a “petro-country,” as the #1 provider of energy in the world. The precipitous drop in oil prices is crushing the entire U.S. economy, but especially our friends in West Texas. This afternoon President Trump is meeting with U.S. oil executives to discuss how to best assist in raising the price of oil. Oil had a record rally on Thursday and is up substantially today on the supposition that Saudi Arabia and Russia will cut oil production by at least 10 million barrels per day. That is good news indeed for our petro-economy.

Today also begins “small-business bailouts,” especially important for our restaurants. It doesn’t seem like the banks are quite ready today, but we expect they will be soon. Hang on, restaurants, we need you. Yes, there are massive numbers of $1,200 checks going to individuals, but it is equally, if not more, important that small businesses stay open and their employees stay connected to their businesses. In my view, the U.S. economy is small business writ large.

Given these concerns the financial markets would seem to take a back seat, but I feel the need to comment on them. Warren Buffet once said, “Be fearful when others are greedy and greedy when others are fearful.” There’s no shortage of fear right now: for 1Q20 the Dow Jones Industrial Average was down the most ever and the S&P 500 was down the most since 1938. It may be difficult to see the current situation as an opportunity to “buy low,” but it might make sense to think of it from that perspective.

Weekly Commentary & Statistics

Monday, March 30, 2020

The major global equity markets posted strong gains during a rollercoaster week. Stocks fell and rose as investors reacted to a flood of U.S. unemployment claims and to Congressional approval of a $2 trillion fiscal stimulus package to bolster the U.S economy.

Quarterly Commentary & Outlook

December 2019

While warnings of recession, bear markets and trade wars going into and throughout 2019 were rampant, calendar year equity returns are shaping up to be among the best since 2009. What did the market miss, and what insight might it give us for our 2020 forecast? Well, contrary to popular belief, when the market is coming to an inflection point, it is fundamentals that show the way, not price action, which in fact often shows the wrong way.

  • The New Year is approaching, riding on the heels of raging global stock and bond market rallies.
  • Last year strong fundamentals ultimately led to the best broad-based market in a decade.
  • 2020 is likely to begin with faltering fundamentals, including the first negative earnings growth in 12 quarters along with four consecutive months of manufacturing contraction.
  • There are divergent outlooks among the “Big 3” (Europe, China and the United States); U.S. is stable, but Europe and China face serious challenges.
  • U.S. Manufacturing is contracting, while the U.S. Consumer remains the game changer, a likely tailwind in 2020. Expect calm followed by storms, and remember the sequel is never as good as the original.

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