3/29/19 – Stocks Post Best Quarter in a Decade

Stocks finished the first quarter on a positive note. For the week the Dow gained 1.7% while the S&P 500 increased 1.2%. This was the best quarter in over a decade, following the worst quarter (4Q18) in a similar time period. So we sit here, basically flat to six months ago, but having experienced a wild ride along the way. As we head into early April, companies will be reporting 1st quarter earnings, giving us insight into how corporate America is viewing the economy. The Fed has recently lowered its 2019 growth forecast, Europe’s growth appears to be slowing, so it will be interesting to see if companies are seeing/expecting a similar slowdown. 

Lyft ride-sharing service went public today using a similar dual-class structure to Levi’s last week. The IPO was well received and while the stock closed well below the highs, it did trade up on the day. The valuation for Lyft is shocking to me. It’s never made money, it’s not even close to making money, it has significant competition and yet has a market value of approximately $25 billion. It’s 2018 total sales was barely over $2 billion. It will be interesting to see how the market responds to Uber’s IPO when it goes public in the next month or two. At a similar multiple, Uber could command a market value of $125 billion. That’s borderline crazy. For the time being though, investors were happy to buy shares today. Read More

Larry Kudlow, current White House Economic Advisor and long-time supply-side economist publicly called for the Fed to cut rates by 0.50% today. He suggested this cut would be preemptive and said that nothing was changing about his view on the strength of the economy. That would be a very large reduction, especially as a preemptive move. His point was there very little inflation, which I agree with, and global growth is slowing, so why not make rates a little more accommodating. I don’t think we need to cut rates, but I do think we should stop raising them for the rest of the year. The Fed is supposed to be an independent body, yet the Trump administration has consistently pressured the Fed publicly on interest rate policy. Read More

Oil increased 2.2% this week to close at $60.18/barrel. This is the first time oil has topped $60/barrel since early November. The yield on the 10-yr Treasury moved lower, closing at 2.41% from 2.44% last week. The average rate on a 30-yr fixed rate mortgage moved sharply lower, to 4.06% from 4.28% a week ago. If you were considering refinancing or buying a property, these rates looks pretty attractive.

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