Financial Market Metrics - February 2019 (part 2 of 4)

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Market Summary & Metrics - February 2019Wall Street is on track for another year of record share buy-backs, having repurchased shares totaling just over $1 trillion in their own stock during 2018, according to CNBC. At the same time, Seeking Alpha reported the number of dividend cuts, in its sampling for the first quarter of 2019, has surpassed the total recorded in the first quarter of 2018. In addition, the near-real time sources that it tracked for dividend cut announcements suggests that distress is spreading beyond the oil and gas sector of the economy. Meanwhile, Reuters concluded that analysts expect first-quarter earnings for the S&P 500 companies to decline 0.1% on a year-on-year basis which according to IBES data would be the first decline since 2016. FactSet consensus forecasts that while corporate earnings would be soft in Q-1 2019 due to the combination of several factors, those same earnings would regain momentum for the remainder of the year, finishing at a Q-4 2019 estimated level of almost 9.1% above Q-4 2018. Revenue growth would also be stronger and increasing 5%.

February was a strong month for debt markets, from treasuries to speculative assets, and the yield curve dynamics shifted from a two-year bear flattener to Fed ambiguity, if not outright optimism. Wolfstreet reported that over the 12 months through November, U.S. federal debt rose by $1.26 trillion. Over the period, foreign holders sold $105 billion of treasuries while the Fed sold $204 billion; U.S. government entities such as pension funds and social security bought $20 billion; American banks, fund management companies, institutions and individual investors bought $1.36 trillion. According to the financial website, with world foreign currency reserves having stopped increasing since 2014, and as quantitative easing has slowed or stopped, funding the U.S. government has shifted to savers. "All the movements in asset prices over the past six months bear witness to the huge shift in savings underway,” it averred, “with negative implications ultimately for economic growth.” Importantly, Chairman Powell appears to recognize the issues and told Congress in February that the Fed would be pausing interest rate increases, holding them at current levels. The Fed also hinted about ceasing balance sheet normalization later this year. The Chairman went even further, indicating that if needed, the Fed had the resources to support the economy.

Braun-Bostich & Associates, Inc.

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