The “Kentucky Derby Edition”
May 1st, 2019
Market Commentary (Key items you need to know):
Market Outlook by Ronald E. Lang
Additional Commentary by Allen B. Lang
Kentucky Derby Picks by Ron & Allen
Fun Links (always popular)
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Key items you need to know –
In our last newsletter we spoke about select economic areas showing a slow down in many aspects of our economy. As we mentioned, Europe and other parts of Asia are teetering on a recession. Our GDP was announced last week for Q1′ 2019 and it was “3.2%”. That is an excellent number if it can be sustained. The issue with sustaining that number or higher toward 4% as this administration believes it can get too and sustain is international economic stagnation. It is estimated that over 50% of the S&P 500 companies are multi-national or international companies and rely on foreign countries economies doing well. If those countries are slowing down it will eventually come back here. Even though the S&P 500 is a “broad-based” index of the top 500 companies by market cap, its very important to remember that the top six(6) companies in the S&P 500 have a combined market cap greater than the bottom 300. For a person that believes in fundamentals of sound companies, I’m a technician at heart and the disproportionate statistic in market cap of the top S&P 500 companies can be eery for long-term investors. Meaning at some point there will be a reversion to the mean to make the market caps more in-line with the top 500 public companies in the domestic markets.
Also, in our last newsletter we gave you our prediction that we should start to see signs of a recession as early as the second half of 2019, but no later then the second half of 2020. The Presidential Election season will be very volatile for the markets if the consensus of all the major polls show it to be a close race. If the markets are still doing well, you could see a re-election of the current administration as many people don’t want a major shake-up to an outstanding performing economy and market. We are not political in this newsletter, but if you look at history, this has always been the case.
In the short-term we are looking for a 3%-5% pullback following earnings season which has seen a lot of top-line revenue growth and moderate to negative bottom line growth. As we have always said going into Earnings Seasons, the “guidance” is most important and many companies have guided “down” their earnings expectations. This isn’t a “sand bagging” from the CEO & CFO’s, they are giving us insight into what they are seeing domestically and internationally. Remember, their “sales pipelines” can go from 3 months to 24 months or more. This “tell” is helping investors tell us just as much about the economic outlook as it is about their company’s growth prospects in the near future.
Spring is here and summer is right around the corner. This means, enjoy the weather and the people around us that are adding, not subtracting from our lives. If you are invested properly, then you shouldn’t be losing sleep at night or worried if the market may go down 10% or 15% in the near or distant future. We live in this business everyday and its our business to be worried about your money, not yours. We all have more important things to worry about. If you are losing sleep about your investments, then give us a call to discuss further. Spend time with family and friends and make your summer plans now. Enjoy the Kentucky Derby on Saturday, the first leg of the Triple Crown races.
Ronald E. Lang, Principal
Atlas Wealth Management, LLC
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Commentary by Allen B. Lang, Senior Portfolio Manager
WELL, WHAT NOW?
“As I take pen in hand”, I mean, “ as I put fingers to the keyboard”. I wonder what is next for the market and the economy. The market key indicators have hit new highs after very positive first quarter earnings reports. Clearly 78% of major corporations beat analyst expectations on sales and net profits.
Where do we go from here? Hard to say! Many times the markets are telling you what the future bares. Sometimes pundits will say the markets have run their course and and the highs have been hit and lower stock prices are coming.
I am of the belief that we will see higher stock prices and new highs in the indices. BUT, I would not get too euphoric, I believe we are within 5% of a top for this year. There are still some good buys out there, but beware.
Allen B. Lang, Senior Portfolio Manager
Atlas Wealth Management, LLC
Kentucky Derby Commentary from Allen:
I have been following thoroughbred racing for 70 years. I have seen all the great ones in that time, Swaps, Citation, Seattle Slew, Ferdinand, Affirmed and the best of them all Secretariat.
Let me also say I AM NOT A RACING OR BETTING PUNDIT. I just like to see these
beautiful animals run. See below for Allen’s picks.
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