Advisor Insights Market News Weekly Market Commentary

Is this a late cycle refresher?

Written by: Benjamin Bimson CIMA®, CMT® / CIO, BCJ Financial Group

It is shocking what a difference spring can make in terms of outlook and views.

We began 2019 under the clouds of uncertainty marked by a notably terrible market performance in the final quarter of 2018, but 2019 seems to have brought some surprisingly “Goldilocks” outcomes.

We discovered that the Fed is willing to be patient and is responding to market fears about raising interest rates too quickly. It looks like both sides of the trade war are willing to seek compromise to at least lessen the damage, and Brexit has been pushed off yet again to later this year.

Certainly, we are in a late phase of the markets. How late? That is difficult to discern, but economic indicators have backed off for the moment from indicating increasing concern. Perhaps it is a “not too hot, no too cold” situation.

The difference between the 10 year and 2 year Treasuries is not yet inverted. This is a preferred yield curve for us since it has a much higher correlation to be a reliable recession indicator. The narrowing difference between the two bonds has been in a downtrend since 2011, which is a remarkable time frame, and one of the longest we have data on. Over the past month, the downtrend seems to have at least moderated. Weekly data removes some of the bounciness from the charts.

 

Chart Source: BCJ Financial Group
Over the past month, the downtrend seems to have at least moderated. Weekly data removes some of the bounciness from the charts.

 

On the equity front, we are within striking distance of new highs. Markets might get a bit choppy as the S&P 500 approaches complete recovery from last years troubles. If we can break out to new highs above 2,930 we might just prove that this trouble is yet behind us for the time being.

 

Chart Source: BCJ Financial Group
Here is how remarkable the recovery has looked when we chart the data. You can see how close we are to new highs in an astoundingly short time frame for a nearly 20% correction.

 

So, while we hope that you all are enjoying some marvelous spring weather and the all the joys of the more pleasant weather patterns, we continue to press on to navigate this remarkably dramatic market together.

Risks remain, but a respite and potential of new highs, is at least refreshing! It is a good time to examine your strategy, making sure that you are well prepared for the next round of expansions and contractions. Late cycle economies can be jarring and change direction quickly. The calm periods are the best ones to look for your best next positions to be ready for whatever may come to us in the coming months.

 

 

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Investment advisory services are offered through BCJ Capital Management, LLC., an SEC Registered Investment Adviser. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein. BCJ FG 19-75

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