Beware The Ides Of March

US stocks had their best start to the year in decades

Image source: Mark Nazh - Shutterstock

What's going on?

A 3% rise in February means US stocks are enjoying their best start to a year since 1987. Tech companies are largely to thank – but not the ones you might expect… (tweet this)

What does this mean?

The rising tide of an imminent trade deal between the US and China helped lift most stocks’ boats, including industrials companies previously caught in the trade war crossfire. These were the second-best-performing stocks in February (rising 6%, according to FactSet), but in first place came information technology stocks including the likes of PayPal and Visa. Last year’s MVPs – the truly monster tech FAANG stocks – rose just 1% in February on average.

Why should I care?

The bigger picture: More fuel for the fire.

It’s not just stocks having a strong 2019: the price of a barrel of oil has risen over 30%, making up much of its losses late last year. Investors had been worried that OPEC was producing too much oil – but the major group of oil-producing nations eventually agreed to limit output. And demand for the black gold’s set to increase, especially with the US releasing higher-than-expected fourth-quarter economic growth figures on Thursday, albeit well below mid-2018 levels.

For markets: The information on technology stocks.

Investment bank Goldman Sachs doesn’t expect stocks to do much more for investors over the next 12 months, predicting 10% returns in the US, 6% in Asia, and 5% in Europe. But it does agree with investors buying information technology stocks, noting in a report this week that technology represents 28% of all business investment in the US – and that this figure’s likely to grow. Furthermore, the shift to subscription-based business models means tech companies’ earnings are getting more predictable. But not, perhaps, HP’s: shares fell 16% on Thursday after the company lowered its annual sales forecast. Hedge funds may have foreseen HP’s weakness: they reduced their stakes last quarter, according to TipRanks data.

Originally posted as part of the Finimize daily email.

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