Weekly Market Commentary


Market Commentary

Weekly commentary providing analysis with an outlook for the equity market.

June 2019 Market Commentary


In Q4 of 2018 we experienced the worst performance in any Q4 since the Great Depression (Source: FactSet).  In Q1 2019 we had the best start to a year in decades.  Since then the markets have pulled back, bringing us to where we are now. The question on everyone’s mind is: “Are we headed into a recession?” Our take is that we are not and here’s why.

In our previous October 2018 commentary we argued that we were not going to see a recession in 2019. We based this on the fact that corporate earnings were continuing to rise. That said, our trend-following signal* went negative on November 3, 2018.  So, what’s going on? It is our opinion that the market is still in a correction phase, as opposed to being in a bear market.

Market history tells us that the highest correlation to predicting recessions is declining corporate earnings.  For Q1 of 2019 corporate earnings came in flat, verses 24.6% growth in Q1 of 2018.  While early analysts’ EPS estimates for Q2 are coming in at negative 2.1%, keep in mind that companies have a tendency to beat analysts’ estimates (Source: FactSet).  These same analysts are forecasting positive EPS growth for the remainder of 2019.

Ø  Our resulting conclusion is that we are still in a correction, not a bear market.  What does that mean to you?  We continue to hold cash in portfolios, thereby maintaining a defensive posture.  

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*Our trend-following signal is a momentum indicator that shows the relationship between two moving averages.             

+ Past performance is not indicative of future results.