A Bear Market Antidote

The US economy added 313,000 new jobs in March compared to consensus estimates of 200,000. This was a big surprise to Wall Street. Further adding to the robust showing was the labor participation rate which showed more than 800,000 Americans entering the workforce. Markets interpreted this news favorably and stocks surged.

Unlike the February jobs report, the March figures were especially savory to investors. A growing workforce and minimal wage increases point to a low inflation outlook. This means that interest rates will remain inside of their recent range.

The stock market has left behind the turmoil it suffered in February. The February decline of 12% might end up being the briefest correction ever. For example, the last significant fall in the market between August of 2015 to February of 2016, stocks dropped 15%. After that, it took six months for the market to recover.

This latest correction lasted just nine days and Friday’s jobs numbers may have given the market the antidote it needs to return to a bullish mode.

Over the past month, concerns over rising interest rates dissipated. Investors now view the Fed’s measured approach to rate hikes as benign and accommodating to markets.

Likewise, interest rates have remained in check since the early days of February and as a consequence, the market has been able to push higher. As long as interest rates are reasonably well behaved, we can plan for the stock market to advance towards the January market highs, 4% above today’s level.

Throughout last year and the first quarter of 2018, the signature names in the market remain Amazon, Netflix, and Boeing. These are the stocks attracting the large institutional money managers and funds. Until they relinquish their leadership or economic winds change, this trio should be in the crosshairs of investors. These crown jewels never broke their uptrends even under the duress from February and they continue to climb to all-time highs.

Amazon, Boeing, and Netflix remain a part of our actively managed portfolio. We recognize the need for care while investing in these stocks since throughout the last year, and buy points are usually at extended and stretched long-term levels. Investing in these companies defies the traditional “buy low and sell high” mentality since these stocks have are never at “low” levels.

We made numerous changes to portfolios as market volatility increased. Many stocks are showing new potential amidst a potentially accelerating economy. The primary leadership areas are the technology and financial sectors.

Our sanguine outlook for the industrial and manufacturing stocks was derailed recently with the tariffs imposed on steel and aluminum. The scare from this issue caused shares of manufacturing companies to fell over 15% in the last few weeks. This worry seems overblown which could make industrial companies attractive investment candidates.

Strong economic showing emerging from this jobs report coupled with muted interest rate increases suggests a strong antidote to the market nausea that happened in February.

Peregrine Asset Advisers ● 9755 SW Barnes Rd. Suite 295 ● Portland Oregon 97225
503.459.4651 ● 800.278.1420 ● www.peregrineaa.com

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*Past Performance is no guarantee of future results. Investment management involves the possibility of losses. Significant general stock market moves up and down can influence the performance of client portfolios. Composite returns are based on client portfolios of over $100,000. Not all clients are included in the composites. All returns include the reinvestment of dividends. All returns are net of fees. Composite returns are derived from aggregated, time weighted returns for clients of Peregrine Asset Advisers. Individual client returns can deviate from the composite returns. While Peregrine uses the S&P 500 as a benchmark, Peregrine does not attempt to mimic the structure of this index. Individual client portfolios vary. The number of stock positions also varies per client.