Beware Of Media And Execs Blaming Tariffs For Any And All Shortcomings

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Posted: Aug 30, 2019 9:06 AM
Beware Of Media And Execs Blaming Tariffs For Any And All Shortcomings

Source: AP Photo/Stephen B. Morton

It was another solid session on light volume ahead of the big Labor Day weekend. These kinds of sessions are always difficult to discern, and more so with the trade war and all the efforts to talk down the economy and stock market. 

My best assessment over the last couple of sessions is the market resolve is good,  but it could have been great.  The most important thing for investors is the development of clear winners and losers in individual sectors and industries.

Moreover, beware of this urge for media and executives to blame tariffs for any and all shortcomings.  Best Buy (BBY) was down because it was a bad quarter and Dollar General (DG) rocketed to an all-time high on a great quarter.

S&P 500 Index

+1.27%

Communication Services (XLC)

+1.56%

Consumer Discretionary (XLY)

+1.50%

Consumer Staples (XLP)

+0.05%

Energy (XLE)

+1.47%

Financials (XLF)

+1.51%

Health Care (XLV)

+0.76%

Industrials (XLI)

+1.71%

Materials (XLB)

+1.28%

Real Estate (XLRE)

+0.72%

Technology (XLK)

+1.74%

Utilities (XLU)

+0.69%

Rotation

I began writing about a potential bond rotation years ago, and that still hasn’t happened, but we got a glimpse of what it could look like yesterday. 

We also got a glimpse of rotation within equities - which could happen a lot sooner than bonds – as the biggest winners the last couple of sessions have been the biggest losers of 2019. 

To be clear, sometimes stock do well from macro actions like flight to safety and sometimes they rock on great news.  That’s the case with Real Estate and Consumer Staples. There have been great earnings reports making these safe havens even more attractive.  

Safety Nets

Utilities (XLU)

Real Estate (XLRE)

Staples (XLP)

One Month

+3.58%

+5.05%

+0.66%

Three Months

+5.57%

+7.01%

+7.41%

The question is where funds should go from here?  Is it into momentum names in Technology and Communications Services or laggards like Energy and Financials?

I’m not going to force the issue on the laggards, but there are sectors and names that aren’t disasters, nor overbought crowded trades, that look inviting. 

Portfolio Approach

Communication Services

Consumer Discretionary

Consumer Staples

1

2

1

Energy

Financials

Healthcare

1

1

2

Industrial

Materials

Real Estate

3

2

1

Technology

Utilities

Cash

2

0

4

 

Today’s Session

The major indices are all in the green again this morning, but August is still on track to finish the month lower. 

On the economic front, personal income increased 0.1 percent in July, the smallest gain in nearly a year, following an 0.5 percent in June.

Personal Spending

The largest component of personal income, wages and salaries, increased 0.2 percent in July on after increasing 0.5 percent in June.

Personal Income

Consumer spending was hefty in July, rising 0.6%, while inflation remained low. 

The Personal Consumption Expenditure (PCE) price index, was up 0.2% in July, taking the annual rate from 1.3% to 1.4%.