Stocks continued to struggle as the Trump Administration rolls out changes to the policies of the Biden Administration. No doubt, some (you determine the percentage) are needed. However, as the financial markets hate uncertainty, there needs to be come clarity as well as continuity prior to the market making meaningful headway. That said, it is times like these that provide opportunity, and we will remain patient to see what unfolds. Given the oversold short-term technical indicators, it is probably a little too late to sell unless the economic uncertainty accelerates or takes an expected turn. Bottom line, the market may continue to churn near these levels.
- Corrections are common, to be anticipated, to be seen as long-term opportunities and to be embraced. Since 1928, stocks have pulled back at least 5% an average of 3.4 times per year; 10% an average of 1.1 times per year; at least 15% once every two years and by at least 20% once every three years or so. With the above in mind, as investment advisors, we work hard to keep your portfolios allocated in accordance with your long-term objectives. As a side note, we completed the most recent rebalancing a week ago Friday, February28. (Source; Ned Davis Research)
- The European Central Bank cut interest rates by 0.25% to 2.50%, the sixth such rate cut over the past nine months. This easing of monetary policy should spur overall economic growth as well as loan demand. We will see how this plays out given the comments from Germany Chancellor-in-Waiting, Friedrich Merz that “I want to be very clear here, whatever it takes must also go for our defense now in view of the threats to our freedom and to peace on our continent” which suggests a pick-up in spending. We also can’t minimize the drastic change in policy coming from Germany in regard to defense spending. Credit President Trump.
- U.S. Financial Services Giant Blackrock has agreed to purchase shares of its unit that operate ports near the Panama Canal from CK Hutchison, a Hong Kong based conglomerate for $23 billion.
- At the outset of 2025 investors expected one rate cut from the Fed totaling 0.25%. However, due to the perceived slowdown in the economy, three are now expected. Before starting to worry, we believe that should the Fed follow through with these cuts, it will most likely be to preempt such a slowdown or perhaps because of a drop in inflation to near their two-percent target. Thus far this cycle the Fed has cut three times for a total of 1.00%.
It’s The Economy…”
- Non-Farm Payrolls (approximately 80% of the U.S. workforce) rose by 151,000 during February, slightly below the consensus estimate of 160,000. Payroll numbers for the prior two months were revised to 125,000 and 323,000 from 143,000 and 307,000 during January and December, for a net loss of 2,000. The rolling three-month average fell to 199,700 from 236,300. Interestingly, thePublic Sector added 11,000, which includes a 10,000 drop in federal government employment. The Unemployment Rateticked up to 4.1% during February from 4.0% one month prior. The Unemployment Rate had gotten as low as 3.4% in April 2023. Average Hourly Earnings rose 0.28% or $0.10 to $35.93 during February from $35.82 one month prior and by $1.39 or 4.02% from $34.54 y/y. Average Weekly Earnings rose 0.28% or $3.41 to $1,225.21 during February from $1,221.80 during January. Average Weekly Earnings over the past year have risen by $40.49 or 3.42% from $1,184.72. The number of Long-Term Unemployed (27 weeks or longer) rose 12,000 or 0.83% to 1,455,000 in February from 1,443,000 in January, well above the level of 1,213,000 (SAAR) one year ago. Those unemployed less than 15 weeks totaled 64.4% of the unemployed while those unemployed 15 weeks and over totaled 35.5% as compared to 61.9% and 38.1% one month ago. (Source, U.S. Department of Labor)
- The Institute for Supply Management’s Composite Index of Service Sector Activityrose to 53.5% during February from 52.8% in January. Of note were New Orders(52.2% v 51.3%), Employment(53.9% v 52.3%), Backlog of Orders (51.7% v 44.8%) and Business Activity (54.4% v. 54.5%). The Prices Paid Componentrose to 62.6% during February from 60.4% during January. (Source, Institute for Supply Management)
- The Institute for Supply Management’s Composite Index of Manufacturing Sector Activityfell to 50.3 during February compared to 50.9 in January. Generally, a reading above 50% indicates that the manufacturing economy is expanding, below indicates one in contraction. This month’s level marked the highest since October 2022. Of note were the changes in New Orders(48.6% v. 55.1%), Production(50.7% v. 52.5%), Supplier Deliveries(inverse, higher number indicates slower delivery times)(54.5% v. 50.9%), Inventories (49.9% v. 45.9%) and Employment(47.6% v. 50.3%). The Prices Paid Componentsurged to 62.4% during February from 54.9% during January.
- Mortgage Rates according to the Federal Home Loan Mortgage Corporation (FreddieMac), “the 30-year fixed-rate mortgage saw the largest weekly decline since mid-September. The decline in rates increases prospective homebuyers’ purchasing power and should provide a strong incentive to make a move. Additionally, this decline in rates is already providing existing homeowners the opportunity to rebalance. In fact, the refinance share of market mortgage applications released this week reached nearly 44%, the highest since mid-December.”(Source, Federal Home Loan Mortgage Corporation)
Upcoming Economic Reports scheduled to be released this week include the following; on Tuesday, the January Job Openings and Labor Turnover Survey (JOLTS); on Wednesday, February Retail Inflation as Measured by the Consumer Price Index (CPI); on Thursday, the Weekly Report of Initial Claims for Unemployment Benefits along with February Wholesale Inflation as Measured by the Producer Price Index (PPI); and, on Friday, the Preliminary March Report on Consumer Sentiment from the University of Michigan.
Q4-2024 Earnings Season Has Begin To Wind Down. Nonetheless, several companies of note are scheduled to report, to include –Oracle (ORCL), Dick’s Sporting Goods (DKS), Adobe (ADBE), Williams-Sonoma (WSM), Ulta Beauty (ULTA), Docusign (DOCU) and Dollar General (DG).
General Disclosure:“This presentation is not an offer or solicitation to buy or sell securities. The information contained in this presentation has been compiled from third party sources and is believed to be reliable, but its accuracy is not guaranteed and should not be relied upon in any way, whatsoever. Fagan portfolio characteristics and holdings are subject to change at any time and are based on a representative portfolio. Holdings and portfolio characteristics of individual client portfolios may differ, sometimes significantly, from those shown. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the securities listed.
Additional information including management fees and expenses is provided on our Form ADV Part 2. The actual return and value of an account fluctuate and, at any time, the account may be worth more or less than the amount invested. Bond Investments are affected by interest rate changes and the credit-worthiness of the issues held in the portfolio. A rise in interest rates will cause a decrease in the value of fixed income positions. Past performance results are not indicative of future results.”
