The Week Of March 18 May Send Stocks Sharply Higher

The Week of March 18 May Send Stocks Sharply Higher

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The week of March 18 will be busy and if things go well it may help send stocks sharply higher and the S&P 500 on a path to 3,000

FOMC Meeting

The week of March 18 will be a pretty big one. The Fed will hold its March meeting. Expectations are for no rate hike, and the market still widely expects no rate hike in 2019, with a 30% chance of a rate cut.

(CME Group)

Economy Slows

First quarter GDP forecasts are still very weak, with the Atlanta Fed GDPNow projecting growth of 0.4%. The CNBC Rapid Update expects growth of 1.4%. A pretty wide-spread between the two. It is worth noting that since 2015, the first quarter has typically been the weakest quarter of the year.

(Bea.gov)

The economic slowdown is of no surprise to anyone. However, the current earnings estimates would suggest that the first quarter is likely to be the trough in the cycle with growth slowly recovering in the quarters to follow.

eps grwoth

(Data from Dow Jones S&P)

Global Growth Proxies

We have pointed out over the weeks the rebounding prices in many of the critical commodities. But another product that we talk about a lot, but not in the context of commodities are semiconductors. Semiconductors may be just as crucial in today’s world as copper or any industrial metal. Think about the number of devices in your life that use chips, from refrigerator, cars, phones, watches, nearly every device today in our lives use Chips.

Broadcom may have made the most significant statement that went untold and it indicates that the global economy may be bottoming. On their fiscal first quarter 2019 conference call Hock Tan, the CEO, said:

Many of our peers have commented that they are seeing a softening demand environment, especially out of China. While we are experiencing the same demand dynamics, we have factored in much of this macroeconomic backdrop when we provided fiscal 2019 guidance last quarter.

As a result, after a solid start to the year, we are reaffirming our fiscal 2019 revenue guidance of $24.5 billion. Having said that, we expect our semiconductor business to bottom in the second fiscal quarter, driven almost entirely by the seasonal drop in wireless.

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Disclaimer: This article is my opinion and expresses my views. Those views can change at a moment's notice when the market changes. I am not right all the time and I do not expect to be. I ...

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