MINNEAPOLIS The slow one now will later be fast….and the first one now will later be last. Bob Dylan’s famous refrain is an apt description of the April stock market, which was led by the four weakest sectors of the past year – Energy, Financials, Materials, and Health Care.
On the flip side, Utilities, which had been the best performing sector through the first quarter of 2016, was one of the three worst-performing sectors in April, along with Telecommunications and Information Technology.
Also trailing the market were some of the leading technology stocks, which had paced the market last year. Among the worst tech performers this year are Netflix, LinkedIn, Microsoft, and Apple.
Overall, most of the movement in the S&P 500 index was sideways throughout April, with the market managing to eke out a slight 0.3 percent gain for the month – and 1 percent for the year.
A weak 1st Quarter Gross Domestic Product (GDP) report issued by the U.S. Commerce Department on April 28 precipitated a slight drop in stocks during the final day of the month. The GDP report, which is the broadest measure of economic output, revealed that GDP had grown at a seasonally adjusted annual rate of only 0.5 percent through the first quarter of 2016. That was the lowest GDP growth level in the past two years.
“While we are not forecasting a recession,” explains Russell Swansen, Chief Investment Officer for Thrivent Financial, “we do believe the economic slowdown indicates that the risk of recession is not insignificant. We expect the GDP growth rate this year to be lower than it has been the past few years.”
Other economic highlights from the month included:
Employment numbers still solid. Employment has been one of the bright spots of the economy in recent months, and the April Employment Report from the U.S. Department of Labor brought more good news. According to the April report, non-farm payrolls were up 215,000 in March following a gain of 245,000 in February.
But the number of new jobs fell short of the number of new individuals now looking for work. The labor force grew by 396,000, according to the report, which was considerably higher than the number of new jobs filled. The estimated number of new jobs for the first quarter of 2016 was 628,000, which is slightly above the quarterly average of about 610,000 per quarter since the job market began to recover in 2011.
Fed makes no moves. The Fed again left interest rates unchanged. Based on indications from the Fed, we expect no more than two rate hikes through the remainder of this year.
Dollar continues to drop. The dollar continued to drop versus the Euro and the Yen, which is good news for U.S. exporters. But we wonder how much longer this trend will continue.
Oil rebound. Oil prices continued to increase into the mid-$40s per barrel by the end of April, prompting a rebound in energy stocks.
China does better. After months of concern over weakness in the Chinese economy, China issued a new economic report April 15 that indicated the economy was stabilizing with a Gross Domestic Product GDP growth rate of about 6.5%.
S&P 500 Continues to Edge Up
The best performing sectors in the S&P500 Index for the month of April were Energy, up about 9 percent, and Materials, up 6 percent, and Health Care and Financials, both up about 5 percent.
The worst performing sectors were Information Technology, down about 3 percent, and Telecommunications and Utilities, both down about 2 percent. Consumer Staples finished the month even.
The Industrials and Consumer Discretionary sectors were both up about 2 percent for the month.
For the complete report with performance charts and analysis on the stock and bond markets, as well as updates on oil, gold and currency click on the following link: Read full Thrivent April Market Report.
The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Thrivent Asset Management associates. Actual investment decisions made by Thrivent Asset Management will not necessarily reflect the views expressed. This information should not be considered investment advice or recommendations of any particular security, strategy or product. Past performance is not a guarantee of future results. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon, and risk tolerance.
Asset management services provided by Thrivent Asset Management, LLC, a wholly owned subsidiary of Thrivent Financial for Lutherans, Appleton, WI. The principal underwriter for the Thrivent Mutual Funds is Thrivent Distributors, LLC. Thrivent Distributors, LLC is a registered Broker-dealer and member of FINRA with its principal place of business at 625 Fourth Avenue South, Minneapolis, MN 55425.
The S&P 500® Index is a market-cap weighted index that represents the average performance of a group of 500 large-capitalization stocks.
Kate McDermott, 612-844-4537