Weekly Market Overview | February 25, 2019

February 25, 2019 by Peter Sorrentino

In market action last week, we witnessed a continuation of the recovery rally in the cyclical stocks, as materials led the market with a 3.78% gain, followed by utilities (up 2.72%), technology (up 2.27%) and financials (up 2.24%). Apart from the telecommunications stocks, managing only a 0.2% gain, the balance of the market was clustered around the +1% level. The size bias continues to be in favor of smaller companies, as the S&P 600® Index led the way with a gain of 2.72%, versus the larger S&P 500® Index gain of 1.73%. The size bias carried over into global markets as well, as the MSCI Emerging Market Index tacked on 2.272% to the MSCI EAFE® Index gain of 1.58%. The cyclical recovery theme carried over into commodity prices as demonstrated by the 4.69% jump in the price of copper. Agricultural prices were up 2% on average for the week as well. Domestic energy prices surged over 5% last week on news that the U.S. exported over 3.6 million barrels of crude oil a day for the week of February 15th. This puts the U.S. second only to Saudi Arabia in terms of export volume.

On Wednesday afternoon, investors received something of a reprieve from the minutes of the January Federal Reserve Bank meeting. Unlike past episodes of monetary policy tightening, where the Fed raised short-term interest rates and throttled back on money supply growth, this cycle features an actual contraction in the money supply. This contraction, being a function of the central bank, reduces the size of its balance sheet at the rate of $50 billion a month. Recall at the peak in 2015, the Fed’s balance sheet had ballooned to $4.7 trillion in assets as a result of the extraordinary measures taken during the financial crisis to provide liquidity to the economy and hold down the cost of funds. The reductions to date have reduced the balance sheet holdings to $4 trillion. While $50 billion sounds like a large number, relative to the size of not only the U.S. economy, but its financial markets as well, this is something of a red herring. Like anyone coming back from a particularly enjoyable vacation, going back to the reality of everyday life can be daunting. Investors who have enjoyed a decade-long holiday from economic reality have criticized the Fed’s actions, and it appears the Fed may have blinked. By way of reference, we are now within five months of having the longest U.S. economic expansion in history. The same market that was forecasting a recession last fall is now acting as the harbinger for a manufacturing renaissance. Perhaps, more likely, it simply was off on its timing and magnitude. Our asset allocation anticipates a late cycle expansion of industrial spending, benefitting smaller, more domestically-focused businesses. We experienced a couple of false starts last year in this direction, so we may have been early on timing, but directionally in the right place.

For a PDF version of this publication, click here: 02.25.19_WeeklyMarketOverview

 

NOTE: IMPORTANT INFORMATION
Source: Unless otherwise noted, all statistics herein obtained from Bloomberg.
This is not a complete analysis of every material fact regarding any company, industry or security. The information and materials herein has been obtained from sources we consider to be reliable, but Comerica Wealth Management does not warrant, or guarantee, its completeness or accuracy. Materials prepared by Comerica Wealth Management personnel are based on public information. Facts and views presented in this material have not been reviewed by, and may not reflect information known to, professionals in other business areas of Comerica Wealth Management, including investment banking personnel. The views expressed are those of the author at the time of writing and are subject to change without notice. We do not assume any liability for losses that may result from the reliance by any person upon any such information or opinions. This material has been distributed for general educational/informational purposes only and should not be considered as investment advice or a recommendation for any particular security, strategy or investment product, or as personalized investment advice. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The investments and strategies discussed herein may not be suitable for all clients. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Comerica Wealth Management consists of various divisions and affiliates of Comerica Bank, including Comerica Bank & Trust, National Association; World Asset Management, Inc.; Comerica Securities, Inc.; and Comerica Insurance Services, Inc. and its affiliated insurance agencies. World Asset Management, Inc. and Comerica Securities, Inc. are federally registered investment advisors. Registrations do not imply a certain level of skill or training. Comerica Bank and its affiliates do not provide tax or legal advice. Please consult with your tax and legal advisors regarding your specific situation. Non-deposit Investment products offered by Comerica and its affiliates are not insured by the FDIC, are not deposits or other obligations of or guaranteed by Comerica Bank or any of its affiliates, and are subject to investment risks, including possible loss of the principal invested. Past performance is not indicative of future results. Information presented is for general information only and is subject to change.

The S&P 500® Index, S&P MidCap Index, S&P 600 Index and Dow Jones Wilshire 5000 (collectively, “S&P® Indices”) are products of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”) and Standard & Poor’s Financial Services, LLC and has been licensed for use by Comerica Bank, on behalf of itself and its Affiliates. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). The trademarks have been licensed to SPDJI and sublicensed for certain purposes by Comerica Bank, on behalf of itself and its Affiliates. Nothing herein is sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, any of their respective affiliates (collectively, “S&P Dow Jones Indices”) or Standard & Poor’s Financial Services LLC. Neither S&P Dow Jones Indices nor Standard & Poor’s Financial Services, LLC make any representation or warranty, express or implied, to the owners of the content herein, or any member of the public regarding the advisability of investing in securities generally or in particular strategies or the ability of any particular strategy to track general market performance. SPDJI and Standard & Poor’s Financial Services, LLC only relationship to Comerica Bank, on behalf of itself and its Affiliates with respect to the S&P® Indices is the licensing of the Indices and certain trademarks, service marks, and/or trade names of S&P Dow Jones Indices and/or its licensors. The S&P Indices are determined, composed and calculated by S&P Dow Jones Indices or Standard & Poor’s Financial Services, LLC without regard to Comerica Bank and its Affiliates or any of the content herein. S&P Dow Jones Indices and Standard & Poor’s Financial Services, LLC have no obligation to take the needs of Comerica and its Affiliates or the owners of any of the content herein into consideration in determining, composing or calculating the S&P Indices. Neither S&P Dow Jones Indices nor Standard & Poor’s Financial Services, LLC are responsible for and have not participated in the determination of the prices, and amount of any particular strategy or the timing of the issuance or sale of any particular strategy or in the determination or calculation of the equation by which any particular strategy is to be converted into cash, surrendered or redeemed, as the case may be. S&P Dow Jones Indices and Standard & Poor’s Financial Services, LLC have no obligation or liability in connection with the administration, marketing or trading of any particular strategy. There is no assurance that any particular investment product based on the S&P Indices will accurately track index performance or provide positive investment returns. SPDJI is not an investment advisor. Inclusion of a security within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment advice.

NEITHER S&P DOW JONES INDICES NOR STANDARD & POOR’S FINANCIAL SERVICES, LLC GUARANTEES THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE WAM STRATEGIES OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNCATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES AND STANDARD & POOR’S FINANCIAL SERVICES, LLC SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES AND STANDARD & POOR’S FINANCIAL SERVICES, LLC MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIM ALL WARRANTIES, OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY COMERICA AND ITS AFFILIATES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P INDICES OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES OR STANDARD & POOR’S FINANCIAL SERVICES, LLC BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD-PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND COMERICA AND ITS AFFILIATES, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.

“Russell 2000® Index” is a trademark of Russell Investments, licensed for use by Comerica Bank and World Asset Management, Inc. The source of all returns is Russell Investments. Further redistribution of information is strictly prohibited.

MSCI EAFE® is a trade mark of Morgan Stanley Capital International, Inc. (“MSCI”).

FTSE International Limited (“FTSE”) © FTSE 2016. FTSE® is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under license. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

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Weekly Market Overview | February 18, 2019

February 18, 2019 by Peter Sorrentino

Last week had all the trappings of a cyclical recovery. Energy stocks, buoyed by a 2.5% rise in crude oil prices, led the market by posting a 5% gain. Clustered tightly in second and third place were the industrials (+3.59%) and the materials (+3.38%) sectors. In keeping with the strength in the cyclicals was the weak performance of the traditionally-defensive sectors: utilities (+0.05%), telecommunications (+0.98%) and consumer staples (+1.04%). Lacking a strong showing by technology shares, the market took on a value tilt for the week with the Russell 1000® Value Index advancing 2.78% to the 2.34% gain of the Russell 1000® Growth Index. In the size derby was a week of “less was more”, as the S&P 600® Index gained 4.4%, the S&P 400® Index gained 3.3% and the S&P 500® Index gained 2.5%. Internationally, however, the reverse was true, as the MSCI EAFE® Index picked up 1.96%, and the MSCI Emerging Market Index fell 0.52%. Commodity prices were generally positive, thanks to the pro-cyclical bent of the market last week which drove not only oil prices higher, but industrial metals increased as well. Agricultural prices were mixed, as many traders will be waiting for data from the USDA regarding planting intentions of U.S. farmers before altering their positions.

The ongoing leadership rotation among both sectors and capitalization highlights, once more, the need to rebalance portfolios. Portfolios overweighed by the heavily biased and narrow leadership of the previous advance are ill positioned to benefit from the emerging trends in the market. It was our anticipation of this that led us to move our asset allocation last year to embrace a slightly smaller average market capitalization and to add a slight emphasis to value over growth. What we did not do was make an all-in wager with client assets looking for a “winner take all” outcome. As none of us has precise knowledge of how and when the future will unfold, we rely upon financial discipline to guide us. By challenging the implications of the market's actions, we are able to see risks building and opportunities emerging. These insights assist us in our goal of optimizing the return potential, while seeking to abate a measure of market risk for client portfolios.

For a PDF version of this publication, click here: 02.18.2019_WeeklyMarketOverview

 

NOTE: IMPORTANT INFORMATION
Source: Unless otherwise noted, all statistics herein obtained from Bloomberg.
This is not a complete analysis of every material fact regarding any company, industry or security. The information and materials herein has been obtained from sources we consider to be reliable, but Comerica Wealth Management does not warrant, or guarantee, its completeness or accuracy. Materials prepared by Comerica Wealth Management personnel are based on public information. Facts and views presented in this material have not been reviewed by, and may not reflect information known to, professionals in other business areas of Comerica Wealth Management, including investment banking personnel. The views expressed are those of the author at the time of writing and are subject to change without notice. We do not assume any liability for losses that may result from the reliance by any person upon any such information or opinions. This material has been distributed for general educational/informational purposes only and should not be considered as investment advice or a recommendation for any particular security, strategy or investment product, or as personalized investment advice. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The investments and strategies discussed herein may not be suitable for all clients. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Comerica Wealth Management consists of various divisions and affiliates of Comerica Bank, including Comerica Bank & Trust, National Association; World Asset Management, Inc.; Comerica Securities, Inc.; and Comerica Insurance Services, Inc. and its affiliated insurance agencies. World Asset Management, Inc. and Comerica Securities, Inc. are federally registered investment advisors. Registrations do not imply a certain level of skill or training. Comerica Bank and its affiliates do not provide tax or legal advice. Please consult with your tax and legal advisors regarding your specific situation. Non-deposit Investment products offered by Comerica and its affiliates are not insured by the FDIC, are not deposits or other obligations of or guaranteed by Comerica Bank or any of its affiliates, and are subject to investment risks, including possible loss of the principal invested. Past performance is not indicative of future results. Information presented is for general information only and is subject to change.

The S&P 500® Index, S&P MidCap Index, S&P 600 Index and Dow Jones Wilshire 5000 (collectively, “S&P® Indices”) are products of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”) and Standard & Poor’s Financial Services, LLC and has been licensed for use by Comerica Bank, on behalf of itself and its Affiliates. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). The trademarks have been licensed to SPDJI and sublicensed for certain purposes by Comerica Bank, on behalf of itself and its Affiliates. Nothing herein is sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, any of their respective affiliates (collectively, “S&P Dow Jones Indices”) or Standard & Poor’s Financial Services LLC. Neither S&P Dow Jones Indices nor Standard & Poor’s Financial Services, LLC make any representation or warranty, express or implied, to the owners of the content herein, or any member of the public regarding the advisability of investing in securities generally or in particular strategies or the ability of any particular strategy to track general market performance. SPDJI and Standard & Poor’s Financial Services, LLC only relationship to Comerica Bank, on behalf of itself and its Affiliates with respect to the S&P® Indices is the licensing of the Indices and certain trademarks, service marks, and/or trade names of S&P Dow Jones Indices and/or its licensors. The S&P Indices are determined, composed and calculated by S&P Dow Jones Indices or Standard & Poor’s Financial Services, LLC without regard to Comerica Bank and its Affiliates or any of the content herein. S&P Dow Jones Indices and Standard & Poor’s Financial Services, LLC have no obligation to take the needs of Comerica and its Affiliates or the owners of any of the content herein into consideration in determining, composing or calculating the S&P Indices. Neither S&P Dow Jones Indices nor Standard & Poor’s Financial Services, LLC are responsible for and have not participated in the determination of the prices, and amount of any particular strategy or the timing of the issuance or sale of any particular strategy or in the determination or calculation of the equation by which any particular strategy is to be converted into cash, surrendered or redeemed, as the case may be. S&P Dow Jones Indices and Standard & Poor’s Financial Services, LLC have no obligation or liability in connection with the administration, marketing or trading of any particular strategy. There is no assurance that any particular investment product based on the S&P Indices will accurately track index performance or provide positive investment returns. SPDJI is not an investment advisor. Inclusion of a security within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment advice.

NEITHER S&P DOW JONES INDICES NOR STANDARD & POOR’S FINANCIAL SERVICES, LLC GUARANTEES THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE WAM STRATEGIES OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNCATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES AND STANDARD & POOR’S FINANCIAL SERVICES, LLC SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES AND STANDARD & POOR’S FINANCIAL SERVICES, LLC MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIM ALL WARRANTIES, OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY COMERICA AND ITS AFFILIATES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P INDICES OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES OR STANDARD & POOR’S FINANCIAL SERVICES, LLC BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD-PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND COMERICA AND ITS AFFILIATES, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.

“Russell 2000® Index” is a trademark of Russell Investments, licensed for use by Comerica Bank and World Asset Management, Inc. The source of all returns is Russell Investments. Further redistribution of information is strictly prohibited.

MSCI EAFE® is a trade mark of Morgan Stanley Capital International, Inc. (“MSCI”).

FTSE International Limited (“FTSE”) © FTSE 2016. FTSE® is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under license. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

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Weekly Market Overview | February 11, 2019

February 11, 2019 by Peter Sorrentino

The first full week of February was filled with contrasts, as the performance gap between the top and bottom grew to five full percentage points, with utility shares gaining 2.07%, compared to the 3.01% drop in energy shares. The 4.6% drop in the price per barrel of West Texas Intermediate crude oil served as the catalyst for the weakness in energy-related stocks. Rounding out the top three performers for the week were technology (+1.98%) and industrials (+1.66%) – both managing to hold on to those gains after a very volatile week, fueled first by optimism and then disappointment at the prospect of a trade deal with China before the March 1st implementation of the next round of tariffs between the world’s two largest economies. Filling out the bottom two slots last week were shares of materials and financial service companies, as the previous week’s negatively-revised global economic outlook continued to weigh on those groups. For all the lingering gloom, U.S. equity markets managed to buck the global trend and finish the week fractionally, but broadly, higher. For the week, it was mid-cap stocks with a gain of 0.76% taking top honors, followed by Blue Chips, with a gain of 0.15%, leaving small caps to round out the market with a positive 0.11% gain. This contrasts with the losses posted by both the developed MSCI EAFE® Index (-1.38%) and the MSCI Emerging Market Index (-1.35%). Despite having utilities and industrials taking the number one and three slots this week, the gravitational mass of the technology sector managed to push growth over value in the style race last week. Commodity prices were once again mixed, thanks to the decline in energy prices that offset smaller gains for industrial metals (+1.16%) and agriculture (+1.97%). The yield curve for U.S. Treasury debt shifted down in parallel fashion, roughly 5 basis points across the term structure last week, thanks to strong demand. Investors are continuing to take shelter from the equity market in the face of what they perceive as a rising tide of uncertainty.

We have previously covered the importance of capital spending and its impact on future profits. This past year was a prime example, as capital expenditures jumped by 16% in 2018, after registering only a 10% gain during 2017. As companies have reported fourth quarter and full-year 2018 results, the picture of capital spending for 2019 has come into sharper focus. The current consensus on Cap-Ex for this year has fallen to just a 9.8% advance over 2018. Generally, in the later stage of the business cycle, we see equipment replacements and capacity expansions driving business spending. In addition to those historic forces, this cycle has experienced relatively low productivity growth. In the context of a tight labor market, this creates another compelling incentive for businesses to invest in themselves. The most recent Future Business Activity Survey – released by the Philadelphia Federal Reserve Bank – has some interesting insights. Of the companies surveyed, 46% see increasing demand in 2019, and fully 65% expect to produce more in the first quarter of 2019 than they did in the same period last year. Here is where it gets interesting. When asked how they would produce more, 36% said they would schedule more hours for existing workers, 33% said they would hire more workers and 24% indicated they would spend on enhancing productivity. As our Chief Economist, Dr. Robert Dye, has highlighted in his work, the supply of labor has tightened to the point that most employers must now resort to hiring talent away from another firm, if you can find it. Given the job market, those being asked to work more hours may be more inclined to jump ship, thus, creating a revolving employment door that not only raises cost, but undermines morale and overall productivity. The need for greater Cap-Ex remains, and the question now is, how long will businesses be able to hold off before conditions become critical? We continue to believe that rising business spending will be the next leg of this economy’s journey.

For a PDF version of this publication, click here: 02.11.2019_WeeklyMarketOverview

 

NOTE: IMPORTANT INFORMATION
Source: Unless otherwise noted, all statistics herein obtained from Bloomberg.
This is not a complete analysis of every material fact regarding any company, industry or security. The information and materials herein has been obtained from sources we consider to be reliable, but Comerica Wealth Management does not warrant, or guarantee, its completeness or accuracy. Materials prepared by Comerica Wealth Management personnel are based on public information. Facts and views presented in this material have not been reviewed by, and may not reflect information known to, professionals in other business areas of Comerica Wealth Management, including investment banking personnel. The views expressed are those of the author at the time of writing and are subject to change without notice. We do not assume any liability for losses that may result from the reliance by any person upon any such information or opinions. This material has been distributed for general educational/informational purposes only and should not be considered as investment advice or a recommendation for any particular security, strategy or investment product, or as personalized investment advice. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The investments and strategies discussed herein may not be suitable for all clients. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Comerica Wealth Management consists of various divisions and affiliates of Comerica Bank, including Comerica Bank & Trust, National Association; World Asset Management, Inc.; Comerica Securities, Inc.; and Comerica Insurance Services, Inc. and its affiliated insurance agencies. World Asset Management, Inc. and Comerica Securities, Inc. are federally registered investment advisors. Registrations do not imply a certain level of skill or training. Comerica Bank and its affiliates do not provide tax or legal advice. Please consult with your tax and legal advisors regarding your specific situation. Non-deposit Investment products offered by Comerica and its affiliates are not insured by the FDIC, are not deposits or other obligations of or guaranteed by Comerica Bank or any of its affiliates, and are subject to investment risks, including possible loss of the principal invested. Past performance is not indicative of future results. Information presented is for general information only and is subject to change.

The S&P 500® Index, S&P MidCap Index, S&P 600 Index and Dow Jones Wilshire 5000 (collectively, “S&P® Indices”) are products of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”) and Standard & Poor’s Financial Services, LLC and has been licensed for use by Comerica Bank, on behalf of itself and its Affiliates. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). The trademarks have been licensed to SPDJI and sublicensed for certain purposes by Comerica Bank, on behalf of itself and its Affiliates. Nothing herein is sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, any of their respective affiliates (collectively, “S&P Dow Jones Indices”) or Standard & Poor’s Financial Services LLC. Neither S&P Dow Jones Indices nor Standard & Poor’s Financial Services, LLC make any representation or warranty, express or implied, to the owners of the content herein, or any member of the public regarding the advisability of investing in securities generally or in particular strategies or the ability of any particular strategy to track general market performance. SPDJI and Standard & Poor’s Financial Services, LLC only relationship to Comerica Bank, on behalf of itself and its Affiliates with respect to the S&P® Indices is the licensing of the Indices and certain trademarks, service marks, and/or trade names of S&P Dow Jones Indices and/or its licensors. The S&P Indices are determined, composed and calculated by S&P Dow Jones Indices or Standard & Poor’s Financial Services, LLC without regard to Comerica Bank and its Affiliates or any of the content herein. S&P Dow Jones Indices and Standard & Poor’s Financial Services, LLC have no obligation to take the needs of Comerica and its Affiliates or the owners of any of the content herein into consideration in determining, composing or calculating the S&P Indices. Neither S&P Dow Jones Indices nor Standard & Poor’s Financial Services, LLC are responsible for and have not participated in the determination of the prices, and amount of any particular strategy or the timing of the issuance or sale of any particular strategy or in the determination or calculation of the equation by which any particular strategy is to be converted into cash, surrendered or redeemed, as the case may be. S&P Dow Jones Indices and Standard & Poor’s Financial Services, LLC have no obligation or liability in connection with the administration, marketing or trading of any particular strategy. There is no assurance that any particular investment product based on the S&P Indices will accurately track index performance or provide positive investment returns. SPDJI is not an investment advisor. Inclusion of a security within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment advice.

NEITHER S&P DOW JONES INDICES NOR STANDARD & POOR’S FINANCIAL SERVICES, LLC GUARANTEES THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE WAM STRATEGIES OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNCATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES AND STANDARD & POOR’S FINANCIAL SERVICES, LLC SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES AND STANDARD & POOR’S FINANCIAL SERVICES, LLC MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIM ALL WARRANTIES, OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY COMERICA AND ITS AFFILIATES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P INDICES OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES OR STANDARD & POOR’S FINANCIAL SERVICES, LLC BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD-PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND COMERICA AND ITS AFFILIATES, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.

“Russell 2000® Index” is a trademark of Russell Investments, licensed for use by Comerica Bank and World Asset Management, Inc. The source of all returns is Russell Investments. Further redistribution of information is strictly prohibited.

MSCI EAFE® is a trade mark of Morgan Stanley Capital International, Inc. (“MSCI”).

FTSE International Limited (“FTSE”) © FTSE 2016. FTSE® is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under license. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

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Weekly Market Overview | February 4, 2019

February 4, 2019 by Peter Sorrentino

January passed the baton to February in style last week, as stock prices manifested concurrent themes. Energy and industrial stocks rallied as one might expect in a late cycle advance, with the former rising 3.11%, while the latter added 2.58%. But with the same degree of conviction, we witnessed a decidedly defensive advance, as telecoms gained 3.07%, along with consumer staples’ +2.88% and utilities’ +2.3%. Among domestic companies, there was a slight edge in the performance of the large cap names, as the Russell 1000® Index edged out the Russell 2000® Index by a margin of 1.66% to 1.29%, for the year so far. The Russell 2000® Index still retains the lead at +11.38% to the Russell 1000® Index gain of 8.41%. Again, another week of mixed messages as the late cycle theme favors smaller over larger and the defensive theme tilting to larger over smaller. In the growth versus value contest, last week was a draw, as both added 1.7%. Energy prices were mixed, thanks to a series of events starting off with a larger-than-forecast drawdown of gasoline stockpiles that sent the price of regular unleaded up 9.85% last week. This is attributable to additional sanctions against Venezuela whose heavy, high sulfur crude is the feedstock for much of the U.S. Gulf Coast refineries. On the flip side was the 6.63% decline in natural gas prices, as a warm-up was forecast for much of the U.S. great plains and eastern seaboard, reducing heating demand. Elsewhere in commodity prices, we saw copper and iron ore reversing recent declines, while U.S. grain prices surrendered fractional losses, following what had been a constructive start to 2019. Very quietly in the background, even as global markets rise, there is a flight to safety – or risk off bias – in the overall financial market. Evidence of this can be seen in the U.S. Treasury rates where, even in the face of a partial shutdown, the term structure has been pulling back with yields from one to thirty years to where they started the year after edging higher during the month. Despite the back up in energy prices and the 1% gain for the U.S. dollar, both developed and emerging markets posted gains last week as the MSCI EAFE® Index added 1.37%, and the MSCI Emerging Market Index added 1.73%.

As earnings reporting season ends, the most telling change was the number of companies that reported negative surprises and those for whom forward estimates were reduced. This follows 2017 and 2018, where the opposite was true, and analysts were finding they were consistently too conservative in the forward outlook. Some of this was attributable to margin improvements that reversed the decline experienced in 2015 and 2016. This points out the complexity and limitations of forecasting as the interactions of multiple variables in a complex system can produce unforeseen results. It was this shortcoming that led to a study by the CFA Institute that was published in the early 1990s. The authors looked retrospectively at company stock prices versus the underlying economic value of the enterprise. What the study concluded after looking at forty years’ worth of data, was that roughly 20% of the time, the price of a company was roughly comparable to its economic value; the balance of the time, the share price was either below or above the economic value. On a graph, it looked like a sine wave with roughly an equal distribution of time above and below the gradually upward sloping band that represented the economic value. While we can see this clearly in the rearview mirror, the ability to do so looking forward continues to elude us. The lesson in all of this is that despite advances in financial analysis and market simulation, much of the time, the market is either too cheap or too expensive. Given the rather spectacular failures in attempts to time the market or create portfolio insurance, the best course of action is to be appropriately invested based upon your financial objectives and risk tolerance. Price matters primarily on two occasions – when you buy and when you sell.

For a PDF version of this publication, click here: 02.04.2019_WeeklyMarketOverview

 

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