Market Comments for Friday December 7th, 2018
First Advisors Capital, Inc. (FAC)
Wall Street moved decisively lower over the course of this week, giving up most of the gains from the rally that occurred after Thanksgiving. Currently, the DJIA and the S&P 500 are both down -4.1% on a weekly basis. Companies that do business and sell their products overseas, including technology declined more than 3% today alone.
The Dow Industrial posted a 4.5% weekly loss, while the S&P fell 4.6% and the Nasdaq dropped 4.9%. Those declines are the indexes’ worst start to a December since 2008 when they all tumbled more than 5% in the first four trading sessions of the month.
The selloff accelerated after Trump administration officials reiterated, they plan to take a tough stand in their 90-day trade negotiations with China or impose further tariffs, reigniting concerns about global trade.
The technical situation is still waving a warning flag as Negative Leadership within the market is still firmly in place and the Dow Jones Transportation average continues to lagged the blue chip indexes, moving down -5.7% this week alone.
The economic outlook is solid. The ISM surveys of both manufacturing and services have moved higher, confirming continued economic expansion. Today’s employment report showed that the unemployment rate is steady at 3.7%, and average hourly earnings gained ground, up +3.2% from last year. Consumer Sentiment was unchanged for the preliminary reading in December, which bodes well for holiday spending.
Investors have now dialed down expectations for a December interest-rate increase, with markets currently pricing a 72% probability, down from 83% a week ago, according to CME Group. Looking further ahead, expectations for two or more increases by March have fallen to about 28% from 58% a month ago.
Even though the economy is in growth mode, and the labor market is strong, risks remain evident from a technical standpoint. FAC management will be watching the upcoming Federal Reserve policy statement, due out on December 19th.
Meanwhile, FAC's aggregate average cash position dialed in at +/- 35%, as we continue to hold high quality dividend stocks in defensive areas. This was evident today with FAC's overall average portfolio aggregate return at -0.68%* versus the S&P 500’s -2.30%. Net of all fees, FAC overall average portfolio aggregate Year to Date return is currently -1.78%* verses the iShares S&P 500 Moderate Allocation at -2.47%.
It's generally assumed that most investors look at progress based on recent events, which psychologists call the "recency" effect that can dominate much of our decision making. When it comes to investing, it's a good practice to be aware of this and not allow it to influence your long term goals.
First Advisors Capital, Inc. (FAC) is an Investment Adviser Registered with the State of Alabama. 4956 Valleydale Road Suite 203 / Birmingham, AL 35242 / 205-991-8484
The information contained herein has been obtained from sources believed reliable solely for informational purposes but, is not necessarily complete and cannot be guaranteed. This communication may contain inaccuracies or typographical errors. First Advisors Capital, Inc.(FAC) does not render legal, accounting, or tax advice. Where performance data is shown, past performance is not an indicator of future results. This communication may contain non-public, proprietary, confidential or legally privileged information. Please contact FAC to obtain the additional disclosures necessary to make an informed decision including but not limited to FAC's: Adv. 2a, 2b, FAC Client Investment Agreements, Fee Schedules, Fact Sheets, and other important disclosures and disclaimers, before you invest.
*FAC client actual rates of return net of fees may be more or less. Please contact your FAC Adviser to obtain your actual rates of return, or if you have any question, additional concerns, or if your situation has changed that may effect your present risk tolerance, financial needs or goals. 205-991-8484