Movin On Up (In Market Cap)

Small cap stocks have performed well so far in 2019; however, we believe the environment is getting tougher.

Large caps may take the baton and sustain leadership as small cap performance potentially enters a weaker phase.

Small and large cap stocks may both deliver gains over the rest of the year, but we expect large caps to lead.

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HMC Partners
Modest Pullback or Something Bigger?

Following such a strong rally since the December 24 lows, a pullback is reasonable to expect.

We expect additional stock market weakness beyond last week’s more than 2% decline to be modest.

Fundamentals remain sound, valuations are reasonable, and most technical indicators we follow point to further potential gains ahead.

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HMC Partners
The Bull Turns 10

During the 10-year bull market, the S&P 500 Index has more than quadrupled in value.

It might be the longest bull market, but the 1990s bull market saw substantially higher returns.

Market breadth continues to support higher equity prices and eventual new highs.

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HMC Partners
Five Key Questions

Stocks may keep going higher, but the easy gains likely have been made.

Stock valuations, when compared with bond yields, are actually historically cheap.

The overall technical backdrop supports a continuation of the bull market.

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HMC Partners
The Rally Continues

The market rally continues, with stocks off to their best year’s start since 1991.

Near-term stocks are quite overbought and a pullback could be warranted.

Yet, from a sentiment perspective, we still aren’t seeing signs of the over-the-top optimism that is consistent with major peaks.

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HMC Partners
Key Takeaways from Fourth Quarter Earnings

Earnings growth for the fourth quarter is tracking to a solid 17%, above prior estimates but below the pace of the previous three quarters.

The bar has been substantially lowered for the first quarter, setting up potential upside surprises, particularly if trade uncertainty is diminished.

We expect S&P 500 companies will be able to at least deliver mid-single-digit earnings growth in 2019, driven by solid economic growth, fiscal stimulus, and share buybacks.

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HMC Partners
That Was The Easy Part

Stocks posted their best January in more than 30 years after a historically bad December.

Stocks’ bounce was the easy part; the next 10% will likely be much harder.

There are technical signs that suggest December marked a major low and potentially higher prices are ahead.

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HMC Partners
Is the Fed Almost Done?

We expect the Fed to pause interest rate hikes this week.

While the market environment has been challenging, we think recent weakness increases the chances of a positive market response post-tightening cycle.

Whether the Fed’s rate hike campaign is already over, or will end fairly soon, history indicates that doesn’t suggest a recession is right around the corner.

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HMC Partners