Random Thoughts

Even though the leisurely tempo of the holidays was being enjoyed just a few short weeks ago, the frenetic pace of business and political activity swiftly reemerged.

In last week alone, an agreement was reached on both the USMCA and China/US Phase-One trade accords. Plus, the Q4 2019 earnings reporting period began in earnest, with most of the big banks widely outpacing expectations.

U.S. economic data confirmed ongoing strength that was accompanied by nonthreatening readings for both consumer and producer price inflation. In response, global equities gained 1.6% for the week ending January 17, bested by the U.S large-cap advance of 2.0% that was outdone by U.S. mid-caps (+2.2%) and small-caps (+2.8%).

10 of 11 sectors in the S&P Composite 1500 Index rose in price, along with 86% of its 148 sub-industries. This week’s performance commonality saw the greatest gains largely exhibited by the groups with the weakest rolling 52-week relative strengths (vs the broader market), while the worst returns came from the heretofore relative strength leaders.

Therefore, despite elevated valuations, one might infer that this rally has further to run, due to the underlying rotation.