Investment Commentary – April 29th, 2015

Dow – 18,035.53 (4/29/15 close) (+1.20% YTD)
S&P 500 – 2,106.85 (4/29/15 close) (+2.33% YTD)
10-year Treasury – 2.04% (4/29/15 close) (-5.99% YTD)

  • The Federal Reserve lowered its economic outlook today after a harsh winter chilled the U.S. economy’s growth, reducing the odds for an initial interest rate hike as soon as the Fed’s June meeting. Many economists say the Fed is unlikely to act until September at the earliest so it can assess whether the economy is regaining the momentum it had built last year.
  • A strong dollar has hurt manufacturers’ exports and the plunge in oil prices has led energy companies to slash investment.
  • The government said this morning that the economy grew just 0.2% at annual rate in the 1st quarter, down from 2.2% in the October-December period and below the modest 1% pace expected by economists.
  • S&P 500 1st quarter 2015 earnings season is in full gear, with about 50% of the S&P 500 companies reporting last week. Estimates were significantly revised down over the quarter due to continued U.S. dollar strength and low oil prices, leaving room for companies to surprise to the upside. While analysts are estimating S&P 500 earnings growth to decline -2.7%, S&P 500 earnings excluding the energy sector are projected to grow at 7.6%.
  • Europe’s positive performance in response to commencement of the European Central Bank’s QE program provides optimism that the region may turn a corner and begin to show some sustainable growth. Much like the U.S. stock market Bull Run alongside the Fed’s QE program, reducing interest rates in Europe should help European manufacturers and exporters, especially the larger continental economies such as Germany and France.
  • Analysts like select European companies.
  • Analysts continue to favor the technology sector, but would focus on the mature tech companies with real earnings.
  • Analysts think MLP’s are attractive for 3 reasons. MLP’s have long-term contracts in place which is often less sensitive to oil prices. Already strong domestic energy production is expected to continue to expand significantly. Moreover, there is strong demand for more efficient infrastructure with over $95 billion in growth spending announced to date.

The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.