Did we see the Wall Street surge of 2019 run out of steam this week?
The S&P 500, on the final day of February, chalked up its longest losing streak of the year so far of three sessions.
And it came on the day that the first (and second) reading of US 4th quarter GDP slowed to 2.6% annual from 3.4% annual in the September quarter and 2.9% for 2018 as a whole. That was just under boastful Donald Trump’s target of 3% and his campaign 4%.
And it was also after all the ‘sugar hit’ from tax cuts and buybacks that saw the S&P 500 lose 6.8% last year.
This year though has seen a much better performance, up to the past fortnight or so. The S&P 500 rose 3% for February to be up 11% for the first two months of the year. In other words, the rate of growth slowed sharply last month.
The Dow rose 3.7% last month and the Nasdaq gained 3.4%. the Dow is also up just over 11% so far in 2019 and the Nasdaq a solid 13.5%.
But those mathematically inclined will notice that like the S&P 500, growth in February slowed sharply.
Now some analysts are wondering if momentum is draining away with increasing concerns about the health of the US economy – unemployment claims are at a 10 month high, consumer spending as slowed while business investment picked up last quarter, house prices and new home building are at multi-year lows – in coming months.
And then there’s the health of the Chinese economy in the face of the trade war with Donald Trump’s administration – a settlement was due March 1 but postponed to an unknown date (presumably to allow America and China to conjure up a deal that doesn’t do all that much damage, especially to trump’s 2020 re-election prospects).
Chinese manufacturing remains weak as the first of two monthly surveys on Thursday showed but the economy isn’t tanking.
Donald Trump’s position is of increasing concern about the investigations, his metal stability – the failure of the Kim summit is seen as a negative, despite all the talk of better relations. Trump has driven Kim closer to China and closer to South Korea, marginalising the US.
Interestingly IT was the top-performing sector on Wall Street in February, beating materials and industrials that were buoyed by US-China trade deal hopes.
But worryingly the mega techs (shrunken as they are) like Apple, Amazon, Alphabet, and Microsoft are still underperforming the broader market year-to-date.
And February also saw the most fabled investor in the US – Warren Buffett and his Berkshire Hathaway company – take an enormous blow to their prestige through the investment (26.7%) in Kraft Heinz (KH) which shocked last week with a $US15.4 billion impairment of its assets because of weak demand, prices and what was essentially an admission of poor management.
Buffett has strongly backed his partners in KH – the Brazilian investment group called 3G – and that faith has been found wanting (Buffett was backing 3G’s ham-fisted hostile attempt to takeover Unilever several years ago and was forced to retreat at some personal cost to his reputation).
Kraft Heinz will report another poor result this quarter which in three months time will remind investors and others that Buffett and Berkshire make mistakes.
The multi-billion dollar losses from the plunge into Apple shares will be still there (and won’t vanish until Apple shows it has shaken off the iPhone sales blues).
Meanwhile, February saw solid rises for oil – West Texas Intermediate futures in New York up just over 5% and 23% for January and February, Brent futures rose more than 8% last month and 22% over the first two months.
Gold though saw a 0.8% dip in February but was still up 1.8% so far in 2019; silver fell 3.2% last month but is up 0.1% so far this year and copper rose 5.3% in February to be up 11% for the year to date.
