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Despite increased tensions with Iran and the start of the summer driving season, crude oil had its steepest decline since the late December lows, down 6.6% for the week. The equity markets also extended their recent decline with most averages adding to multi-week declines.
As a follow-up to last week’s comments on the American Association of Individual Investor (AAII) survey, Bullish sentiment slid again from 29.8% to 24.7%. Bearish sentiment also declined from 39.3% to 36.1%. An abnormally high percentage of respondents are now Neutral (39.2% of respondents). This could be attributed to positive factors such as a strong U.S. economy, a Fed on hold, and the completion of a good First Quarter earnings season, countered by worries about international trade. As mentioned, the Survey has typically been a contrarian signal in the market, so pessimism may present opportunity.
With First Quarter earnings nearly complete (483 out of 500 companies have reported), 75% of companies have beat expectations, 6% matched and 19% were below expectations. The combined (reported and estimated) earnings growth for the first quarter now stands at +1.5% versus -2.3% six weeks ago.
Financial Market Update
Dissecting the Headlines: Memorial Day Travel
The American Automobile Association (AAA) monitors travel on major U.S. holidays. For Memorial Day 2019, AAA forecasts that nearly 43 million American will travel over the holiday weekend, a 3.6% increase from last year.
Most travelers, 37.6 million, will drive as their means of travel, up 3.5% from last year. Gasoline prices currently average $2.94/gallon versus $2.99 this time last year. Air travel is forecasted to increase 4.5% from last year. Other forms of travel (train, bus and cruise ship) are forecasted to increase 3.8%.
This holiday travel benefits a large portion of the consumer economy from gasoline stations to lodging to restaurants. Retailers may also benefit as consumers prepare for summer and spend on apparel and outdoor items.
The health of the U.S. consumer has a great impact on the economy and the stock market. We consistently monitor consumer data as part our investment research.
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