Weekly Expert Market Perspectives Park Avenue Securities PAS

Stock Market Continues Record Run

The S&P 500 (+0.9%), Nasdaq Composite (+1.1%), and Dow Jones Industrial Average (+1.2%) broke out to new record highs in a week full of trade headlines that were viewed favorably by the market.  

Cyclical sectors set the pace while U.S. Treasuries sold off. The small-cap Russell 2000 (+0.6%) trailed its large-cap peers.

Commerce Secretary Wilbur Ross started the week by saying "good progress " was being made in "Phase One" negotiations. Progress this week consisted of discussions taking place to remove some tariffs in order to sign this first section, which will reportedly be pushed back to December as both sides continue to discuss terms and a venue.

China's Commerce Ministry announced that it reached an agreement with the U.S. for both sides to phase out tariffs, but President Trump said he had yet to agree to roll back existing tariffs. White House Director of Trade and Manufacturing Policy Peter Navarro confirmed reports that there were at least considerations being made to delay the Dec. 15 tariffs.

The key takeaway was that the market continued to think that some sort of deal will still get signed, unless there are material developments to suggest otherwise. This optimistic view continued to foster a risk-on mindset in the stock market and a bearish sentiment in the Treasury market.

The Dow Jones Transportation Average (+3.1%) and S&P 500 financials sector (+2.4%) outperformed this week and both groups hit 52-week highs. The Philadelphia Semiconductor Index (+2.8%) and the S&P 500 information technology (+1.7%) and industrials (+1.9%) sectors set new all-time highs. The energy (+2.0%) and materials (+2.0%) sectors also outperformed.

The sell-off in the Treasury market sent yields higher in a curve-steepening trade that contributed to the outperformance of the financials sector. The higher yields, though, did hurt sentiment in the real estate (-3.7%) and utilities (-3.7%) sectors.

The 2-yr yield rose ten basis points to 1.66%, and the 10-yr yield rose 20 basis points to 1.93%. The U.S. Dollar Index advanced 1.2% to 98.37. WTI crude rose $1.00 (+1.8%) to $57.21/bbl.

Other positive reminders for the market were monetary policy remains favorable, the labor market remains strong, and the U.S. consumer remains in good shape. For some investors, this reinforced a fear of missing out on a market breaking out to record highs amid signs of trade progress.

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Data and rates used were indicative of market conditions as of the date shown and compiled by Briefing.com. Opinions, estimates, forecasts, and statements of financial market trends are based on current market conditions and are subject to change without notice. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer, or recommendation to purchase or sell a security. S&P 500 Index is a market index generally considered representative of the stock market as a whole. The index focuses on the large-cap segment of the U.S. equities market. Each company’s security affects the index in proportion to its market value. NASDAQ Composite Index is a market value-weighted index that measures all NASDAQ domestic and non-U.S. based common stocks listed on the NASDAQ stock market. Dow Jones Industrial Average is a widely used indicator of the overall condition of the stock market, a price-weighted average of 30 actively traded blue chip stocks, primarily industrials, but also includes financial, leisure and other service-oriented firms. Russell 2000 Index measures the performance of the smallest 2,000 companies in the Russell 3000 Index of the 3,000 largest U.S. companies in terms of market capitalization. MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

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2019-89467 (Exp 2/20)