Market Commentary

Revisiting Energy

As the first quarter earnings season kicked off on April 12, expectations for the energy sector were decidedly negative. That low bar has tempted analysts to forecast a series of positive surprises as recent data releases for both the U.S. and China suggest a stronger economic underpinning, and the manufacturing sector appears to have bottomed in both countries. Oil demand — and prices — typically follow rising manufacturing and factory output, while rising consumer sentiment normally portends an increase in air travel, which also requires higher oil allocations.

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What to Watch this Earnings Season

First quarter earnings season kicks off this week with several big banks reporting this Friday, including sector bellwether JPMorgan Chase (JPM). This quarter will seem quite similar to the fourth in terms of growth and drivers, with mega cap technology leading the way. But importantly, the point when the “493” will start contributing to overall profits is drawing closer (the 493 refers to the S&P 500 minus the seven mega cap technology stocks). Here we preview first quarter earnings season, which will benefit from an improving economic environment and continued strength in technology.

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IPOs as a Market Tell

The initial public offering (IPO) market allows institutional investors to incorporate the macroeconomic landscape with individual corporate earnings data — and future earnings forecasts — to ascertain a share price that will hold up to analyst and media scrutiny coupled with overall market dynamics. However, the IPO market has increasingly included allocations for a retail tranche designed to include clients of brokerage firms that receive shares during the issuance stage of the IPO process. So-called “friends” of the company going public also receive shares via Directed Share Programs (DSPs), but this typically lowers the amount of shares that are available to retail clients. For retail clients, the IPO market is far from a level playing field. The IPO process awards the largest portion of new shares to the institutional market by a wide margin. Here we provide an update on recent IPO activity, performance, and discuss why IPO activity matters for markets.

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Navigating the Strategic Investing Landscape

The difference between strategic and tactical investment time horizons can be likened to the ebb and flow of tidal patterns in oceans. Strategic investing mirrors the steady rise and fall of the tides, focusing on long-term goals and expectations more stable akin to the predictable rhythm of oceans. On the other hand, investing in tactical time horizons resembles the dynamic nature of changing tides, responding to short-term market conditions like unpredictable surges and waves in the sea. Here we compare and contrast these two distinct processes and recap our recent strategic asset allocation change.

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