3/30/18 – Stocks Higher in Final Week of Quarter

Strong rallies on Monday and Thursday pushed stocks higher for the week. Concerns over a trade war dissipated and markets reacted to better than expected 4th quarter growth. The final estimate shows the US economy grew at an annualized rate of 2.9%. This is below the 3%+ rate of the last two quarters, but still significantly higher than the average of the first 16 years of this century. For the week, the Dow gained 2.4% while the S&P 500 increased 2.0%. While we ended the first quarter on a strong week, both the Dow and S&P 500 declined during the quarter. This broke a streak of straight positive quarters for the market. Markets are closed today in observance of Good Friday. Read More

Walmart is in early talks to buy health insurer Humana according to multiple reports. This follows CVS agreeing to acquire another health insurer, Aetna, in December. This could start a trend where we see insurers being consolidated into large businesses as the pressure to keep reducing healthcare cost intensifies. Stripping out layers of administrative costs seems like a positive, but consolidating purchasing power contains several risks. Drug research is very expensive and has a very low success rate. We currently have a lot of investment capital directed to drug research because the returns remain attractive. That means we do pay more for drugs, but we have a steady pipeline of new and better drugs. The risk of too much pricing pressure on drugs is less new drug research. On the flip side, we have an aging population and a growing need for doctors. While specialists are still well-paid, many family doctors’ earning potential has declined to the point where it’s hard to justify the time and financial investment of medical school. Additional pressure on that front could turn more of the best and brightest away from becoming doctors.Read More

Oil decreased 1.6% this week to close at $64.91/barrel. The yield on the 10-yr Treasury moved lower to 2.74% from 2.81% last week. The average rate on a 30-yr fixed rate mortgage moved lower to 4.44% from 4.45% a week ago. After a steady climb this year, mortgage rates have been essentially flat for five weeks.

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