What’s On Our Minds:

“The Bulls and Bears in the Market” by William Holbrook Beard. Source: New York Historical Society

William Holbrook Beard was one of America’s finest animal painters. Many of his paintings employed animals to mimic and satirize human behavior.  In 1879, Beard painted “The Bulls and Bears in the Market” which depicts a battle between bulls and bears on New York’s Wall Street.  Over the past 140 years this fight continues!

There has been a bull vs. bear tug of war on Wall Street this year. On the bull’s side of the ring, analysts have been increasing their earnings expectations and yet companies are still beating their estimates at a record pace.  81% of S&P 500 have reported first quarter earnings this spring, with results on pace to be the strongest since the third-quarter of 2010.  Furthermore, tensions on the Korean peninsula have eased in recent weeks which sharply reduces geopolitical tensions that have been weighing on investor sentiment this year.  The market has been hesitant to read too much into the positive reporting trend though. A group that tracks bullish sentiment by way of survey, the American Association of Individual Investors, notes that bullish sentiment peaked back in January at 59.75% and has since decreased to 28.4%. Of course, this survey is useful with the benefit of hindsight, but clearly investors have become skittish this spring.

Which brings us to the bear’s corner of the ring.  Heightened risk of trade wars, which could hurt manufactures of targeted goods and their suppliers are stoking investor fears.  Investors are also worried about rising interest rates, which makes equities less attractive.  An apparent lack of reinvestment of tax savings on the corporate level has also spooked investors. Instead of investing savings for long term sustainable growth, companies have prioritized stock buybacks and employee bonuses.

The constant back and forth between bullish and bearish sentiment this year may seem worrisome but it these types of conditions are expected as you invest over the long term.  Remember, Tufton Capital’s portfolio managers are hard at work looking for undervalued companies, balancing your portfolio and trimming your winners. We’re not focused on short term performance, but rather, the long-term growth of your portfolio!

Last Week’s Highlights:

Daily moves were volatile last week but we finished the week close to where we started.  It was a tough week until stocks rallied back on Friday. April’s Jobs report was released last week which showed that the U.S. economy added 164,000 jobs and the unemployment rate dropped to 3.9% from 4.1%. The report missed expectations though. Investors were expecting 190,000 new jobs. The Federal Reserve said it still plans to raise rates later this year.

Looking Ahead:

Earnings season begins to wrap up this week with only 9% of S&P 500 companies reporting first quarter results. Important economic updates this week include inflation on Thursday and consumer sentiment on Friday.