Our “winter” report in December noted that the stock market had sold off rapidly and we were seeing values. Indeed the bank stocks we recommended then (Citigroup, J.P. Morgan, and Bank of America) have all soared, up over 12% on average. Also Apple, Facebook, and Alphabet (Google) have rebounded nicely, up about 15% as a group.
The recent rally is probably due to two factors: the Fed has indicated that interest rates will not be rising steadily, if at all, anytime soon. And the U.S and China may be close to a trade deal. These are two uncertainties that have haunted the market for months. At 25,860 on the DJIA and 2,828 on the S & P 500 stock index, the market is now within about 5% of all time highs.
What to do? In our view the big banks mentioned above are still attractive, especially on any weakness. Citibank (C, $66) in particular is trading close to, or below, it’s break-up value. All three banks are expected to continue to raise their dividends. The three technology firms continue to post solid results, yet trade at valuations at less than 10% above the average stock. Our favorite is Alphabet (GOOGL, $1,185).
We still don’t see any signs of recession yet, but this ten year old bull market will not go on forever. But with inflation and interest rates low and valuations still reasonable – unlike in 2000 – we could see a moderately higher market by year end. As has been the case recently, volatility will continue, so we recommend always keeping a fair amount of cash on hand to be able to take advantage of bargains when they occur. Please contact one of our friendly advisors for more information on any of the above securities or for a free “portfolio checkup”. We also offer a portfolio management service at a very competitive rate. See the “Portfolio Management” link on this site.
Prices and yields as of March 18, 2019. The above information is believed to be reliable but is not guaranteed to be accurate. Investors should check every investment for suitability for his or her particular needs. Investing in stocks is risky and you could lose some or all of your investment. First Georgetown Securities, Inc. will furnish available investment information supporting the recommendation upon request. Of the above mentioned securities, the author maintains personal positions in Apple (AAPL), Alphabet (GOOGL), Facebook (FB), Citigroup(C), and Bank of America (BAC).