May Market Commentary   Brian L. Kasal, Chief Investment Officer – FourStar Wealth

Economy 

The 1st quarter GDP numbers came out and GDP was a positive 0.2% versus a 1% expectation.  One of the FED economist teams had lowered their expectation correctly to flat or 0%, so it appeared that the economy did slow.  On 4/13 Chinese exports were reported to be slower than expected.  Bond yields went down and the German ten year yields went negative. French yields are now negative to 5 years, and one can lock in a rate of  1.5% for 50 year bonds in France. Clearly this is not positive.

 Jobs

On 4/4 the Jobs number for March came out and the Bureau of Labor Statistics  reported 126,000  new jobs vs an expectation of 248,000 new jobs. This is obviously an important number that if coupled with other internal indicators can be a trend developing issue.

The Labor Force participation rate dropped in March, down to 62.7% of adults employed, matching the lowest in level in 35 years.

While housing starts were down 17% mostly due to weather, new single family homes starts  were up 7.8%. This is usually a lagging indicator.

All in all, we will need to see follow through on various indicators to see if this slowdown is going to accelerate or if this is a short term diversion.

Markets 

While the economy is showing weakness, the markets have not. We have seen individual days of decline, but the general uptrend has continued.  In the US markets in February the markets lagged a bit while inMarch and April we moved to new highs. Mid Cap Stocks and Small Cap stocks surged in recent rally due to investors wanting to avoid the international issues of foreign stocks. Ironically even with the relatively negative results in the European economy, the European stocks are climbing nicely. This is possibly a signal that the economy will recover and is bottoming now. The recent rally in non US stock could be a false signal, but this is always how it looks when it’s real.  Our firms international ETF and Dynamic ETF models that hold a basket of non US country ETF’s have shown nice movement upward for the first 4 months of the year to date. Also most notably the NASDAQ composite of over the counter stocks are now at new highs. This index last hit new highs in 1999, so this is a notable signal

The US and even more so the Non US markets continue to be fairly valued and not yet overpriced.

Other News

While investors are concerned about stocks other investing continues. Venture and start up measurements continue to see funding at record paces. Private company investing seems to have replaced real estate as the alternative of choice for risky investors. Let’s hope those investors get the returns they seek!