Since the Christmas Eve trading day low, the Market has rebounded dramatically, about 15% or so, as measured by the NASDAQ Composite Index. Catalysts for the change in sentiment include a more dovish Federal Reserve, optimism over some solution to the trade and tariff wars, and a sense that while global economic growth is slowing, a US recession is not on the horizon.
The first blush at earnings announcements suggest that while there was some weakness in the December quarter, the outlooks are not all that bad. More to the point, some firms are actually doing quite well. Particularly those growth firms poised to benefit from the innovation cycle taking hold across industries. Merger and acquisition activities have picked up and we fully expect the IPO window to open up shortly.
Earnings season will begin in earnest next week offering a much clearer picture of what managements anticipate lies ahead, and perhaps will offer an initial view of the full year 2019 prospects. Investors have exhibited an appetite for risk, once again, and even cyclical firms have enjoyed a rebound. While top of the news, the current US government shut down and concerns over the status of Brexit and the UK government, haven’t yet dampened investor enthusiasm. The next two weeks or so, should be quite telling as we get back to what really matters- the earnings.
The Market does indeed climb a wall of worry!