December 4, 2019

A tactical uptrend is likely to continue into mid-first quarter. In contrast to Q2-Q3 2019, short-term overbought conditions remaining overbought is consistent with a market that has transitioned into an uptrend from the Q2-Q3 trading range. We continue to caution investors from attempting to micro-manage near-term pullbacks. The HCM BuyLine® remains positive and is indicating a strong market into year-end.

  

WW12.4.19


The Russell 2000 is breaking out of the Q2-Q3 trading range with relative performance in the very early stage of reversing its 2019 downtrend. Pullbacks early in a bull cycle tend to be shallow and are opportunities to increase exposure, so continue to add on pullbacks.

Equity markets sold off over the past two days. While the cumulative decline is a mere 1.2%, the sharpness of the reversal is notable and the abrupt change in character from much of November stands out. Moreover, the selling intensified Monday with the downside reading of US ISM Manufacturing (48.1 vs 49.2 expected). In our view, we would be buyers of this pullback. Our base case remains that the 2020 economy will be better than the 2019 economy, thus setting the stage for a move towards 3,185 before year-end.

With the December 15 deadline for new tariffs on the importation of Chinese consumer products quickly approaching, both sides have a strong incentive to announce an agreement and for the US to cancel the scheduled new tariffs. China with its slower growth, and the Trump Administration looking for an election year win for farmers, each have good reasons to reach an accord and announce a meeting between Trump and Xi to seal the deal. This news could come this week.

  • The unemployment rate inched up 0.1 percentage point to 3.6% in October as the number of unemployed persons reached 5.86 million (5.77 million in September).
  • Total employment increased by 128,000 in October after adding 180,000 (revised) new jobs in September.
  • The average monthly job gains so far in 2019 is 167,000 (223,000 in 2018).
  • Notable employment increases for October occurred in restaurants and bars (48,000), social assistance (20,000), financial activities (16,000), professional and business services (22,000), and health care (15,000).
  • Sectors seeing a drop in employed persons include government (17,000) and manufacturing (36,000).
  • The labor participation rate rose 0.1 percentage point to 63.3%, and the employment-population ratio remained at 61.0%.
  • The average workweek remained at 34.4 hours for October.
  • Average hourly earnings rose by $0.06 to $28.18.
  • Over the last 12 months ended in October, average hourly earnings have risen 3.0%.

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