by Connor Darrell CFA, Assistant Vice President – Head of Investments
Global equity markets inched higher in the holiday shortened week (markets were closed on Friday in observance of Good Friday) amid a slew of economic data that surprised to the upside. March retail sales figures came in stronger than expected and showed a strong bounce back from a weaker than expected February. Additionally, jobless claims fell to their lowest level since 1969.  Bond yields crept higher throughout the week, with the 10-Year Treasury yield touching its highest level in over a month.  The move was likely fueled in part by the positive economic data triggering some optimism for economic growth.

As of the end of the week, about 15% of S&P 500 companies had reported Q1 earnings results, with 78% of them reporting positive EPS surprise. Even so, according to data collected by Factset, the blended earnings growth rate for those companies that have reported is -3.9%. The high incidence of positive surprise combined with the relatively uninspiring growth rate reflects how low expectations were coming into Q1 earnings season. We will continue watching as more companies report results and we get a fuller picture of corporate profitability during the beginning of 2019.

2019: The Year of the IPO
2019 is set up to be a particularly active year in the IPO (initial public offering) market. Before year’s end, disruptive companies like Uber, Airbnb, and WeWork are expected to join Lyft, Pinterest, and Zoom on the list of large tech firms making their public trading debuts this year (Pinterest and Zoom both debuted last week and Lyft completed its IPO back in March). Many investors have been clamoring to get into these trendy names, but others have been quick to point out that the flurry of activity may be a sign of overexuberance in markets. In any case, as with any investment, the general rule of thumb for investors interested in buying shares of a stock that recently debuted on an exchange is to do your research. The power of FOMO (fear of missing out) can be particularly fierce when it comes to high profile companies, especially as the financial news outlets are perpetuating stories of huge gains for early investors. But that’s just the thing, those huge gains that pundits like to talk about were available to only the earliest investors and have already been realized. Any new investment needs to be evaluated through the lens of the current price, as the price you pay for an investment is the single most important factor in determining success.

by Connor Darrell CFA, Assistant Vice President – Head of Investments
Most major stock indexes posted small gains for the week, with U.S. stocks (as measured by the S&P 500) slightly outperforming their international counterparts. Q1 earnings season officially kicked off with some high-profile earnings beats, including encouraging results from Walt Disney and JP Morgan. The current earnings season is being tabbed as one of the more important in recent years, as analyst surveys have pointed to a general expectation that corporate profits may actually post negative growth when compared to the data from Q1 2018. The expectations for limited earnings growth stem from two primary factors. First, the benefits of tax reform are no longer boosting the year-over-year comparison since companies now are likely to have the same effective tax rates as last year. Secondly, rising wages and raw materials costs are putting downward pressure on profit margins. Across the market, analysts are calling for 5% growth in revenues, but for that growth to be offset by increases in the cost of doing business.

Labor Market Remains the Strongest Aspect of a Still Healthy Economy
On Thursday, the Labor Department reported that weekly jobless claims had fallen to their lowest level since 1969. Jobless claims are reported as an absolute measure, meaning that they are just a running tally of total new claims for unemployment insurance. What makes the most recent measure particularly impressive is that the last time jobless claims were this low, the labor market (total eligible workers within the economy that are either working or looking for work) was only 60% of its current size. The labor market continues to be an area of strength for the U.S. economy, and the Fed has made note of this in recent meeting notes. In fact, the minutes from the Fed’s most recent policy meeting were released on Wednesday and made specific reference to the tightness in the labor market, pointing out that it was “noteworthy” that the health of the labor market has not led to higher inflation.