Stock Market: Happy Easter 2019

(Drivebycuriosity) - It`s Easter again. Many countries in the Western world celebrate Easter in some way or another. In Germany for example most people have 4 days off, including Good Friday (called "Karfreitag", a Catholic term) and Easter Monday. Even Wall Street was closed on Good Friday.

Easter also stands for the begin of spring. The German literature has a lot of Easter poems which are referring to the seasonal issue. The most popular German Easter riddle is "Der Osterspaziergang" (the Easter walk  osterspaziergang) by Johann Wolfgang von Goethe. It starts with the line "Vom Eise befreit sind Strom und Bäche" ("freed from the ice are rivers and creeks").

Since Easter 2018 the US stock market, represented by the S&P 500, gained about 12%, thanks to the sharp rally since begin of this year (plus 16% year-to-date). In the recent weeks stock prices got spurred by news that China´s economy is re-accelerating (driveby), signs that Trump´s trade war against China is deescalating and an impressive start of the earnings season. According to FactSet "to date, 15% of the companies in the S&P 500 have reported actual results for Q1 2019. In terms of earnings, the percentage of companies reporting actual EPS above estimates (78%) is above the 5-year average (factset).



Solid Tailwinds 


I am convinced that the rally will continue, mainly for 4 reasons:

1. Company profits will proceed with their solid growth, the engine of the stock market gains. During the recessions of the years 2001/02 and in 2008 companies restructured and reduced costs significantly in order to survive. Now they are much fitter and more efficient than before. I believe that this learning process will continue and will translate into a long term trend of rising company profits.

2. We are experiencing a new industrial revolution.  Advances in Internet (cloud, 5G), mobile computing, 3-d-printing, robotics, nano- & biotechnology and other technologies are reducing costs, raising efficiency and creating new markets.

3. Lower taxes and less regulation in the US will also continue to support the growth of the company earnings.

4. There are solid tailwinds from the emerging markets which are even getting stronger. The catching-up process in China (which is still growing about 6% annually), India, Indonesia and a lot of other countries translates into high growth in large parts of the global economy ( wikipedia) that creates continuously rising revenues & profits for global companies like Starbucks, IBM, Caterpillar, Apple and other members of the S&P 500.

Happy Easter!