U.S. stocks took off their rally caps this week, taking the first pause since Christmas. The S&P 500 ended the week flat while Emerging Markets outperformed. Following a challenging year for Emerging Markets in 2018, they have come back strong as one of the best performing asset classes this year. In a well-diversified portfolio, it is easy to point to the worst performing asset in any given year and question why you own it. Yet, jettisoning Emerging Markets after last year would have resulted in missing one of the best performing assets so far this year.
Headlines this week (Jan 21-25, 2019)
- U.S. stocks broke a four-week win streak with a flat performance.
- No visible progress made on trade talks with China.
- U.S. Small-Cap stocks continue to outperform.
- Emerging markets, Foreign bonds, and Gold are up on U.S. dollar weakness.
- Half of the S&P 500 Financials have reported Q4 results, with an average of 18% earnings growth.
The Week Ahead (Jan 28-Feb 1, 2019)
- Earnings reports from Apple (AAPL), Microsoft (MSFT), Facebook (FB), and Visa (V)
- 1/30: The Federal Reserve Rate Decision (no change expected)
- 2/1: Non-Farm Payrolls Report (consensus is 168,000)
Spotlight Asset Allocation: Biotech
The Small-Cap Biotech sector is emerging strong this year, with the SPDR Biotech ETF (XBI), up 14.7%. Large pharmaceuticals are ready to buy these companies to generate growth by leveraging their massive balance sheets, distribution channels, and expertise. We believe Biotech (particularly small cap) is a sector with a long-term secular growth tailwind and we see it as a useful addition to enhance a portfolio’s overall small-cap exposure.
Have a Question? Ask Us.If you have any questions you want to ask our investment team or advisors, fill in the form below and look for your answer in an upcoming edition.
Stock Highlight of the Week
Earnings reports are in full swing this week with results mostly positive. Consumer Staples and Energy sectors were the laggards. The leading sector this week was Technology thanks to earnings results from…
- Lam Research Corp. (LRCX) the microchip equipment maker reported a surprisingly strong quarter. The company topped earnings expectations and served up a $5 Billion share repurchase program. The actual results, while weak (2% year-over-year revenue decline), were better than feared and the buyback is about 20% of current market capitalization. The better-than-feared quarter gave a nod to our microchip equipment maker holdings KLA-Tencor Corp. (KLAC) who will report their earnings on Tuesday and microchip maker NXP Semiconductors NV (NXPI).
- The Lam news was interpreted as the long-feared micro-chip cycle may not have slowed. Not all our microchip related holdings had a sweet week though. Investors received Intel Corp.’s (INTC) earnings with reservations. Even though, the company reported a 9% year-over-year revenue jump, the soft guidance and a miss on results from the Data Center unit rained on the microchip parade. The company is expected to name a new CEO in the next month and may be setting the bar low for a new leader. Another chipmaker having a sour week was Qualcomm Inc. (QCOM). The mobile phone chip giant lost a court battle in Germany over copyright violations by a phone maker. This was a small skirmish in the bigger global legal battle over how much the company is charging for its patents.
|Indices & Price Returns||Week (%)||Year (%)|
|S&P 400 (Mid Cap)||0.1||9.4|
|Russell 2000 (Small Cap)||0.0||10.0|
|MSCI EAFE (Developed International)||0.5||5.5|
|MSCI Emerging Markets||1.4||6.9|
|S&P GSCI (Commodities)||-0.8||9.4|
|MSCI U.S. REIT Index||1.1||7.6|
|Barclays Int Govt Credit||0.2||0.2|
|Barclays US TIPS||-0.1||0.2|
Founded in 1979, Strategic is a leading investment and wealth management firm managing and advising on client assets of over $1.7 billion.Overview
Strategic Financial Services, Inc. is a SEC-registered investment advisor. The term “registered” does not imply a certain level of skill or training. “Registered” means the company has filed the necessary documentation to maintain registration as an investment advisor with the Securities and Exchange Commission.
The information contained on this site is for informational purposes and should not be considered investment advice or a recommendation of any particular security, strategy or investment product. Every client situation is different. Strategic manages customized portfolios that seek to properly reflect the particular risk and return objectives of each individual client. The discussion of any investments is for illustrative purposes only and there is no assurance that the adviser will make any investments with the same or similar characteristics as any investments presented. The investments identified and described do not represent all of the investments purchased or sold for client accounts. Any representative investments discussed were selected based on a number of factors including recent company news or earnings release. The reader should not assume that an investment identified was or will be profitable. All investments contain risk and may lose value. There is no assurance that any investments identified will remain in client accounts at the time you receive this document.
Some of the material presented is based upon forward-looking statements, information and opinions, including descriptions of anticipated market changes and expectations of future activity. Strategic Financial Services believes that such statements, information, and opinions are based upon reasonable estimates and assumptions. However, forward-looking statements, information and opinions are inherently uncertain and actual events or results may differ materially from those reflected in the forward-looking statements. Therefore, undue reliance should not be placed on such forward-looking statements, information and opinions.
No content on this website is intended to provide tax or legal advice. You are advised to seek advice on these matters from separately retained professionals.
All index returns, unless otherwise noted, are presented as price returns and have been obtained from Bloomberg. Indices are unmanaged and cannot be purchased directly by investors.