Double-Digit Gains For All in the First Quarter!

A solid Friday rally provided a fitting end to one of the best first quarters for the market in years.

Remember all the doom and gloom we went through on Christmas Eve?

Who would’ve known back then that the NASDAQ would surge more than 16% over the following three months? Furthermore, the S&P jumped by about 13% and the Dow increased around 11%.

It was a quarter dominated by a suddenly dovish attitude from the Fed and a countless number of positive headlines on a trade deal with China (that we’re still waiting for, by the way). And it didn’t hurt that the market had a lot of ground to recover from a late-2018 correction that was way more severe than it needed to be.

Encouraging trade headlines continue to this day, as Treasury Secretary Steven Mnuchin just tweeted of “constructive” trade talks with China officials on his latest round of meetings in Beijing with U.S. Trade Representative Robert Lighthizer. Such trade news helped distract the market over the past couple of days from concerns about slowing economic growth and inverted bond yields.

As a result, stocks didn’t repeat last Friday’s sharp selloff. Instead, the major indices finished the session near their highs with the Dow jumping 0.82% (or more than 211 points) this Friday to 25,928.68. The NASDAQ advanced 0.78% to 7729.32 and the S&P increased 0.67% to 2834.4.

The second quarter has a lot to live up to now. However, a real trade deal would get the job done, especially since the market doesn’t have to worry about rate hikes or impeachment hearings in the near future. Even if an agreement doesn’t result in an immediate and immense rally, it’ll be well worth it to take this weight off the market’s mind.

China’s Vice Premier Liu He will be back in Washington next week for more talks. Wouldn’t it be great if we could get this trade resolution all done before earnings season starts up again in a few weeks? Hey, after such a strong first quarter performance, why not be optimistic!

Today's Portfolio Highlights:

Home Run Investor: The Aerospace – Defense Equipment industry is in the top 8% of the Zacks Industry Rank… and yet this portfolio had no exposure. Brian Bolan changed that on Friday with the addition of Astronics Corp. (ATRO), a Zacks Rank #2 (Buy) that makes lighting and electronics that are used in cockpits in both military and commercial markets. The company has beaten the Zacks Consensus Estimate for three straight quarters and the editor is very fond of the stock’s valuation. Brian thinks ATRO could reach new highs in the near future if net margins continue to improve as they have over the past three quarters. Read the full write-up for more on this new buy.

Counterstrike: “The market just locked in its best quarter in over 10 years, up over 12%. Despite the yield curve and recession talk, there is a stubborn bid helping stocks stay over 2800. I expect this is the possibility of a China trade deal that’s keeping investors in. Nobody wants to miss the move higher, and you don’t want to be short into a trade deal.

“What a quarter. I was taken off guard with many by not expecting this upward drift to continue. While we nailed the bottoms and caught some stocks near the lows, I didn’t see the massive move higher. It just seems unnatural to me to see aggressive selling like we did in Q4, just completely vanish. However, with the Fed getting dovish and a China trade deal coming into play, there was reason to buy.

“The big catalyst for Q2 will be the completion of the trade deal. Stocks can continue higher if we get that deal. The tricky part will be earnings. Has the recent global slowdown hurt companies’ top lines? We should find out in late April.” – Jeremy Mullin

Value Investor: "Will there be enough in these (upcoming earnings) reports to give a boost to stocks?

"I'm cautious. While I'm still bullish on the US economy and there aren't many recession signals flashing, even Warren Buffett this week acknowledged in an interview that the US economy had slowed.

"Is this just a bump in the road or will it lead to something else?

"The crash of the 10-year yields seem to indicate the later, but the bond vigilantes have been wrong before over the last 10 years.

"But look for the Street to continue to have the jitters. Caution is still the name of the game." -- Tracey Ryniec

Have a Great Weekend!
Jim Giaquinto

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