The Market Bull – April 24, 2019
The major averages closed with small losses on little news. Though another rumored settlement to the Chinese trade war is making the rounds.
The Mortgage Bankers Association reports that mortgage activity fell for a 3rd straight week down 7.3% as refi’s slipped 11% and purchase apps dropped 4.1%. The 30-year contract rate for a jumbo loan increased fractionally to 4.35%.
The Philadelphia Fed state coincident indexes advanced in 44 states during March, fell in 5 and unchanged in 1. A 4 variable series it primarily looks at employment related data including nonfarm payroll employment, average hours worked in manufacturing by production workers, the unemployment rate, and wage and salary disbursements deflated by the consumer price index.
With the mainstream media cheering the new market highs, while earnings look to fall for a 3rd consecutive quarter. Little mention is paid to some very relevant context, namely painfully high valuations, and that said valuations are going even higher as earnings fall, kind of interferes with the “ain’t everything grand mantra”. Someone is going to be horribly wrong about this market, the professionals who have largely sat it out, or retail investors that tended to dive back in, particularly as the markets approached new record highs. A potential hurdle for the stock market is corporate debt. Corporate debt as a share of total market capitalization is trending about 15 percentage points higher than prior to the Great Recession and around $3 trillion above its peak in the last business cycle.
All the while, U.S. debt to GDP has spiked to more than 100%, compared with its average of 65% before the financial crisis. Trillion-dollar deficits are exacerbating the nation’s fiscal woes. But nothing screams success like record debt.
Standard and Poors 500 Index closed at: 2,927.25 down 6.43
NASDAQ finished the day: 8,102.01 down 18.81
Gold ended trading at: $1,277.60 up $4.40