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Weekly Market Commentary

Market Recap Week ending 3.1.19

-Darren Leavitt, CFA

Last week the proposed increase of trade tariffs on China was postponed while negotiations continued between the countries. Markets continued to view the negotiations as constructive although comments from US Trade representative Lighthizer during his testimony in front of Congress on trade seemed a bit less optimistic.  Enforcement is still seen as a major hurdle.

Investors also heard testimony from Fed President Powell on Monetary policy.  Markets welcomed his comments that the Fed was close to a plan that would end the balance sheet runoff and the Fed would remain patient on rates.  No real change here- but his comments seemed more impactful on markets than some of the other headlines that hit last week.

The political theater was also on full display last week with Trump’s former personal lawyer Cohn testifying before Congress.  Trump’s visit to Vietnam to meet with North Korea’s leader Kim Jong Un was prevalent in the headlines but offered very little impact to the markets.

Economic data was mixed last week.  The advanced reading on Q4 GDP was a bit better than expected at 2.6% vs. the consensus estimate of 2.4%.  The Chicago PMI was also better than expected, coming in at 64.7 vs. 57.5.  On the other hand, the ISM Manufacturing Index missed expectations coming in at 54.2 vs. 56.   The University of Michigan’s index of consumer sentiment was also light at 93.8 vs. 95.6.  Internationally, PMI’s in China and Japan both were disappointing with the former showing its third month of contraction.

The S&P 500 gained 0.4% for the week while the NASDAQ increased by 0.9%.  The Dow and Russell 2000 were essentially flat.  The S&P 500 was able to close above the 2800 level on Friday, but that level continues to be a major level of resistance and will be a key level for the markets over the coming weeks.  Treasury yields continued to tick up last week.  The yield on the 2-year gained 7 basis points and closed at 2.55% while the 10-year increased 10 basis points and closed at 2.76%.  Gold struggled last week losing $23 to close at $1299 an ounce.  Oil was off slightly for the week and closed at $55.81 a barrel.

We had some significant changes to the model last week that have positioned our models in a more conservative posture.  The largest move was out of emerging markets and into US corporate paper.  We also sold out of our positions in Gold and long duration US treasuries. Additionally, we reduced our position in US real estate.  The models added a position in International bonds and increased positions in international real estate and 7-10 year duration US treasuries.  Please let us know if you have any questions about the models and or the recent changes.

The information in this Market Commentary is for general informational and educational purposes only. Unless otherwise stated, all information and opinion contained in these materials were produced by Foundations Investment Advisers, LLC (“FIA”) and other publicly available sources believed to be accurate and reliable.  No representations are made by FIA or its affiliates as to the informational accuracy or completeness.  All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation. No party, including but not limited to, FIA and its affiliates, assumes liability for any loss or damage resulting from errors or omissions or reliance on or use of this material.

The views and opinions expressed are those of the authors do not necessarily reflect the official policy or position of FIA or its affiliates.  Information presented is believed to be current, but may change at any time and without notice.  It should not be viewed as personalized investment advice. All expressions of opinion reflect the judgment of the authors on the date of publication and may change in response to market conditions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. You should consult with a professional advisor before implementing any strategies discussed. Content should not be viewed as an offer to buy or sell any of the securities mentioned or as legal or tax advice. You should always consult an attorney or tax professional regarding your specific legal or tax situation. Investment advisory services are offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.

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