Publications, Insights, & News

Last week stocks enjoyed their best week since November 2018 despite rampant policy uncertainty. Policy uncertainty remains high, particularly around trade, but you wouldn’t know it from last week’s stock market rally, which jumped 4.4% on increasing hopes for Federal Reserve (Fed) rate cuts. That jump brought the S&P 500 Index to within 2.5% of its April 30 record high. However, that doesn’t mean stocks are in the clear as the trade conflict with China continues.

Should stock investors be concerned about the signals coming from the bond market? Trade tensions were the biggest reason stocks suffered their first down month of 2019 in May, but worrisome signals from the bond market contributed. This week we look at what the bond market signals mean for the stock market and examine the disconnect between the bond market and economic and stock market fundamentals

Our favorite leading indicators are signaling that futher economic growth and stock market gain may lie ahead. With the economic cycle celebrating a record tenth birthday this summer, the big question is how much longer can the expansion go? This week, we will look at our Five Forecasters for late-cycle warnings. Historically, these indicators—which are summarized in our Recession Watch Dashboard—have collectively signaled a transition to the later stages of the economic cycle and an increased potential of an oncoming recession and bear market.

Earnings season delivered as expected. With 92% of results for S&P 500 Index companies in the books, first quarter 2019 earnings are tracking to roughly flat with the prior year [Figure 1]. While flat earnings don’t sound impressive, we consider it a victory given consensus estimates were calling for a 4–5% decline when earnings season began (source: FactSet). Here, we recap the numbers and provide some key takeaways from earnings season. . .

U.S.-China trade tensions escalated last week. President Trump increased tariffs on $200 billion of Chinese imports to the United States from 10% to 25% and has threatened to put 25% tariffs on an additional $325 billion of Chinese goods—a process that could begin this week, though it would take a couple of months to implement.

“Sell in May and go away” is probably the most widely cited stock market cliché in history. Every year a barrage of Wall Street commentaries, media stories, and investor questions flood in about the popular stock market adage. This week, we tackle this commonly cited seasonal pattern, and why some seasonal weakness could make sense in 2019. . .