July 24, 2019

 07-24-2019 BL

Last week’s market action was particularly telling, reinforcing the Cyclical stock narrative. The S&P began to pause and pull back. Bond proxies, staples and defensive leadership underperformed, while a broad list of Cyclicals not only outperformed but rallied in absolute price as well. We continue to expect this rotation to build traction through the second half of 2019 and well into 2020 as part of a broader market cycle recovery.

 

07-24-2019 syss

Another short-term pullback began to develop last week, and we continue to view the rotation away from Safety stocks toward Cyclical stocks. This important technical event is likely to impact portfolio performance into year-end 2019 and well into 2020.

For the week ending on July 13, there were 216,000 claims for unemployment insurance, an increase of 8,000 from the previous week's level, which was revised down by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ending on July 6. The advance number of those receiving unemployment insurance benefits during the week ending on July 6 was 1,686,000, a decrease of 42,000 from the prior week's level, which was revised up by 5,000.

  • Import prices dropped 0.9% in June, pulled down by falling fuel prices (-6.5%). This marks the first monthly decrease in import prices since December 2018.
  • Excluding fuel, import prices decreased 0.3% for June and are off 1.4% for the year.
  • Over the last 12 months ending in June, import prices have plunged 2.0% — the largest 12-month drop since the index fell 2.2% from August 2015 to August 2016.
  • Export prices for domestic goods and services sold to foreign buyers fell 0.7% in June, after decreasing 0.2% in May. The June decline was the largest monthly drop since a 0.8% decrease in November 2018.
  • Exports fell 1.6% for the year ending in June, the largest 12-month decline since the index decreased by 2.4% from August 2015 to August 2016. Overall, this report further highlights the lack of inflationary pressures both in the U.S. and globally.

Oil prices plunged last week, closing at $55.97 per barrel by late Friday afternoon, down from the prior week's price of $60.32. The price of gold (COMEX) continued to climb, closing at $1,426.50 by late Friday afternoon, up from the prior week's price of $1,416.30. The national average retail regular gasoline price was $2.779 per gallon on July 15, 2019, $0.036 higher than the prior week's price but $0.086 less than a year ago.

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