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Weekly Market Review, March 4, 2019

04 March 2019

Clint McGarvin, CFA® | Portfolio Manager/Research Analyst

U.S. Equities

The S&P 500® was up by about 0.4% last week while small caps were flat. Large caps were led by sectors that typically perform well in an expanding economy. Performance according to CNN Business reflected: Energy (+1.03%), Info Tech (+0.99%), Financials (+0.87%) and Healthcare (+0.43%) outperformed the overall index while Real Estate (-1.65%), Materials (-0.85%), Consumer Discretionary (-0.40%) and Staples (-0.01%) stocks declined last week. Large cap performance was driven by economic reports offering a positive outlook for the economy but was tempered by reports confirming the slowdown we have seen over the last few months[i].

On the upside, February consumer confidence jumped to 131.4 from 121.7 in January[ii]. More importantly, the 6-months forward expectations index jumped from 89.4 in January to 103.4 in February showing consumers have regained confidence in current conditions and have expectations for an even better outlook. Fourth quarter GDP came in at 2.6% growth, well above the expected 1.9% growth rate[iii]. Consumers were once again the strength with personal consumption expenditures (PCE) rising 2.8% in the quarter despite a 0.5% decline in PCE in December. Also, in the PCE report was a 1.0% rise in personal income in December but a 0.1% decline in January. The PCE report overall was positive with increases in personal incomes and a decline in inflation. The PCE price index declined from 1.8% to 1.7% in December showing the same trend in inflation as the Consumer Price Index (CPI)[iv]. The trend in inflation appears to confirm the Fed’s patience on rate hikes is correct.

Consumer discretionary company earnings are being released and the results generally reflect the trend in consumer spending toward athleisure clothing. For example, L-Brands, which owns Victoria’s Secret, continues to struggle as consumers move away from more traditional undergarments toward more comfortable clothing choices such as sports bras[v]. Also highlighting this trend is the earnings report from Foot Looker which exceeded expectations on the back of strong pricing power[vi]. The consumer continues to spend, and the economy does not appear to be heading into a recession in the next few months resulting in continued positive equity price increases we saw last week.

International Equities

International developed equities increased about 0.8% last week while emerging stocks declined about 1.3%. Trade uncertainty between the U.S. and China weighed on investor sentiment last week resulting in flat equity prices.  On Thursday, Larry Kudlow, National Economic Council Director, told CNBC that trade negotiations are going well with “fantastic” progress now being made. This news helped push European equities higher on Friday. European shares were helped by news that inflation had increased slightly from 1.4% to 1.5% indicating that the European economy is firming[vii]. Mainland Chinese equity prices jumped following news from MSCI the weighting of Chinese shares in the MSCI indices will be quadrupled in the global benchmarks later this year[viii]. The economic news out of China continues to be concerning as the Markit manufacturing index in China came in at 49.9 in February, marking the third consecutive month of apparent contraction.


Commodities were down last week, with most energy related, metals and agriculture products declining on the week. Natural gas, coffee, and milk were among the few commodities increasing on the week. Over the past month, energy and metal commodities have increased in price while agriculture prices are mostly lower[ix].

Fixed Income

Treasury yields increased last week with the benchmark 10-year yield rising from 2.65% to 2.76%[x]. The rise in yields followed economic reports, some mentioned above, that indicated the U.S. economy continues to expand but at a slower pace. The decline of 0.1% in personal income was the first decline since November 2015, but the Bureau of Economic Analysis added that lower personal income was partly due to declines in dividends and interest income, wages were up by 0.3% in January. Also helping to push up yields was the ISM manufacturing index which expanded at the slowest pace since November 2016 at 54.2%, illustrating the manufacturing sector is expanding but at a slower pace. Leading indicators within the index also continue to increase albeit at slower rates of growth, with new orders expanding at 55.5% compared to 58.2% the month before and backlog of orders increasing to 52.3 from 50.3 in January[xi]


Based on reported economic data, U.S. and global economies continue to grow. While the growth rate in the U.S. has slowed to be more in-line with the rest of the world, this benefits equity markets by reducing the chance of Fed rate increases. The relatively new and patient positioning of the Fed helped U.S. equities recover from steep declines of the fourth quarter. The rate stance along with comments that the size of the Fed balance sheet may be near optimal levels has helped stabilize interest rates. All of this indicates the current investing climate is rather benign and does not scream out excitement for or against any one sector.

Past performance is no guarantee of future returns.  Performance discussed represents total returns that include income, realized and unrealized gains and losses. Nothing presented herein is or is intended to constitute investment advice or recommendations to buy or sell any types of securities and no investment decision should be made based solely on information provided herein. There is a risk of loss from an investment in securities, including the risk of loss of principal. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for an investor’s financial situation or risk tolerance. Diversification and asset allocation do not ensure a profit or protect against a loss. All performance results should be considered in light of the market and economic conditions that prevailed at the time those results were generated. Before investing, consider investment objectives, risks, fees and expenses.
Frontier does not directly use economic data as a part of its investment process.
Information provided herein reflects Frontier’s views as of the date of this newsletter and can change at any time without notice.  Frontier obtained some of the information provided herein from third party sources believed to be reliable, but it is not guaranteed, and Frontier does not warrant or guarantee the accuracy or completeness of such information. The use of such sources does not constitute an endorsement. Frontier’s use of external articles should in no way be considered a validation. The views and opinions of these authors are theirs alone. Reader accesses the links or websites at their own risk. Frontier is not responsible for any adverse outcomes from references provided and cannot guarantee their safety. Frontier does not have a position on the contents of these articles. Frontier does not have an affiliation with any author, company or security noted within.
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[i] CNN Business (2019), Market Sector report for all sectors. Retrieved from
[ii] The Conference Board (2019), Consumer Confidence Survey®. Retrieved from
[iii] Bureau of Economic Analysis, U.S. Department of Commerce (2019), Gross Domestic Product, Fourth Quarter and Annual 2018 (initial Estimate). Retrieved from
[iv] Bureau of Economic Analysis, U.S. Department of Commerce (2019), Personal Income and Outlays, December 2018; Personal Income, January 2019. Retrieved from
[v] CNBC (2019), Shares of Victoria’s Secret owner L Brands Plunge on Weak Forecast, Mixed Holiday Results. Retrieved from
[vi] CNBC (2019), Foot Locker Rallies Nearly 6% After Same-Store Sales and Profit Crush Estimates. Retrieved from
[vii] CNBC (2019), Europe Markets Close Higher after Fresh US-China Trade Comments; WPP up 5%. Retrieved from
[viii] CNBC (2019), Mainland China shares jump as Major Asian Stock Markets Close Higher. Retrieved from
[ix] CNBC (2019), Markets and Futures and Commodities. Retrieved from
[x] U.S. Department of the Treasury (2019), Daily Treasury Yield Curve Rates. Retrieved from
[xi] Institute for Supply Management (2019), February 2019 Manufacturing ISM® Report on Business®. Retrieved from

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