Could The Trade War Escalation Create An Attractive Entry Point For Investors?

China

Real gross domestic product (GDP) grew 3.2% for the first quarter, well above the upwardly revised consensus estimate of 2.3%. Some analysts picked apart this GDP “beat” suggesting that underlying the headline figures are concerning underlying numbers, such as private domestic sales, which could suggest that a slowdown is ahead. While we would not disagree with this assessment, it is hard to not be impressed by the overall growth of the U.S. economy during the first quarter of the year.

We also think that the report is consistent with our “Slowing but Growing” theme that we have been talking about here for 2019. While the pace of economic growth and earnings growth may slow this year from the torrid pace that they set in 2018, we believe that they both will continue to grow and this level of moderate growth, coupled with a more dovish leaning Federal Reserve, should be constructive for additional, potential growth for select stocks ahead. The GDP report also provided some credence to our belief that the consumer is still confident and spending – remembering that consumer spending accounts for approx. 70% of GDP. Consider that for the first quarter, consumer spending itself rose above forecast – albeit slightly –by 1.2% and topped consensus estimates for the month of March as well with a growth rate of 0.9% from the prior month. Consider also that with 78% of S&P 500 companies reporting Q1 earnings thus far as of May 3, 2019, 76% have beaten earnings estimates and 60% have reported positive revenue surprises.

Investors were rewarded by these economic and earnings gains. Following a strong first quarter, stocks continued their upward ascent during the month of April with the largest gains being realized in developed market countries, notably the United States. For the month, the Dow Jones Industrial Average (DJIA) gained 2.66%, the S&P 500 Index (S&P 500) increased by 4.05% and the technology-heavy NASDAQ Composite Index advanced by 4.77%. This was on top of the quarterly gains of 11.81%, 13.65%, and 16.81% respectively for these three widely-known U.S. equity indices.

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Disclosure: Hennion & Walsh Asset Management currently has allocations within its managed money program and Hennion & Walsh currently has allocations within certain SmartTrust® Unit ...

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