Equity markets are sending signals that suggest all is well and the economy is bouncing back, but the bond market and other defensive assets seem to disagree.

There has been an interesting confluence of market activity and data releases since the December 24, 2018 bottom in the S&P 500 index.

The S&P 500 is up 10% YTD, but earnings estimates have generally declined, meaning stock multiples have generally expanded.

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These multiple expansions have occurred at a time when Global Manufacturing PMIs have had one of their worst reporting periods in twenty years, having declined 10 consecutive months, and 13 out of the last 14 months.

For reference, the only period worse than now was in 2007-2008.

Even more interesting has been the recent strength of Industrial Sector equities while global manufacturing and trade activity have been declining.

During this recent rally in equities, other assets that normally perform well when equities struggle have been performing well, sending yet more mixed signals. Since the recent bottom in the S&P 500 on December 24, 2018, the $US has been up, gold has been up, interest rates have declined, and the only equity sector to move back to new highs has been the typically defensive Utilities.

Our macro committee is holding its monthly meeting this week and will be discussing these oddities and many other economic and market related information. Check back next week for an update on our current views and what we are watching.

The views expressed herein are presented for informational purposes only and are not intended as a recommendation to invest in any particular asset class or security or as a promise of future performance. The information, opinions, and views contained herein are current only as of the date hereof and are subject to change at any time without prior notice.

Rank Dawson, CFA, FDP

Senior Vice President, Investment Strategy
Boyd Watterson Asset Management, LLC