Friends
The bulls were disappointed in yesterday’s price action after the dovish FOMC statement, but were more than satisfied with today’s delayed reaction. Stocks gathered steam after a quick selloff at the open and tacked on some nice gains by the close. Nothing really changed from the day before, so perhaps market participants just became emboldened by the thought that the Fed will be their friend for quite some time.
By the close, the Dow Jones Industrial Average was up 216 points to finish the day at 25,962. The S&P 500 was up 30 points to close at 2854. Gold was up $6 to trade at $1,308 per ounce, while oil was down $.42 to trade at $59.81 per barrel WTI.
The Fed was the story this week, as their change of heart over the past 90 days has been somewhat remarkable. Yes, good for stocks in that the Fed will not be raising rates anytime soon, thus no headwind, but as we mentioned yesterday, is the economy strong enough to support corporate earnings. Estimates are for the S&P to earn about $170 per share in 2019 which would put our P/E near 17 times earnings. If that earnings estimate is right then we are pretty fairly valued. If the estimate is actually a bit aggressive, then we might be a bit overvalued as the year progresses. Of course, there is always a chance that we would get P/E expansion (aided by low interest rates) in 2019, but that would take stocks to more of an overvalued positon. So, I guess this upcoming earnings season is going to be pretty important. First, let’s see how the week finishes out tomorrow.
Have a nice evening everyone.
