Australian building environment and retail sales improved while Canadian employment remained in good favor. French trade improved with German industrial production and Russian GDP. Most of the world continues to enjoy low inflation.
Approximately, 23% of the market is in the SELL WATCH/SELL classification and 17% in the BUY WATCH/BUY classification. This is a much better, balanced condition, than what we experienced at the end of 2017 when 24% was solidly in the SELL/Overvalued classification and only 11% in the BUY/Undervalued classification. This lopsided condition continued to get worse until the last quarter of 2018 when stock prices reversed and relative valuations on the SELL classification returned to normal. The current levels of 11% SELL and 9% BUY are supportive of continued improvement in the market. Please do not equate that to a belief that the market will never go down again, because it will, but it is true that relative valuations can support higher market values for some time into the future.
Advances in valuation slowed in March to just 3.3 points in LargeCap and 2.4 points for the overall market. Smallcap retreated back closer to fair value giving up 1.4 points. All categories are well within fair value range at the end of the 1st quarter. We now have a 10.8 point spread between the highest valuation, MidCap at 116.0% Fv and the lowest, Smallcap at 105.2% Fv.
In North America Canada continued to slow while American housing moved ahead slightly. Consumer expectations softened but employment remained solid. Europe experienced high expectations in Germany and France but disappointments in Spain. Japan watch retail sales improve and Singapore industrial production moved to the positive side. Unfortunately, South Korea watch theirs slow.
The Canadian market is slightly under fair value (100.0% FV) at 98.79%, but well within what is considered a fair value trading range (80.0% to 130.0% Fv). There are 7 sectors considered to have a relative valuation that is slightly undervalued and 4 sectors that are slightly overvalued. The highest relative valuation goes to Utilities at 104.49% FV. The most undervalued sector is Energy at 93.28% Fv. You can see the full table under the menu item: Client Services > World Markets > Americas
Boeing stock price is being hurt by inaccurate news reporting which should be temporary. The company is already well underway in correcting the problem and is implementing a solution. This should not impact Boeing’s long-term ability to deliver revenues, earnings and dividends as expected.
Overall, most indicators passed along a recognition that the slowing taking place on a global scale was not moving into a contraction. Many pricing indicators experienced slight increases. Most production and sales orientated indicators were mixed with some increasing and others of equal importance softening thereby not giving a clear indication in direction.
In managing portfolios, we believe there are additional conditions not covered with traditional identifiers such as when the stock is already in a portfolio, exhibiting favorable/adequate fundamentals and valuations, but not holding a strong buy status. These stocks can still add value to the portfolio, but not as strongly as a full Buy. Or, a manager may need to add to certain areas of the portfolio for asset allocation reasons and no full Buy stocks exist.
Skyworks has now passed all the criteria to be included in the model. The company is global with engineering, marketing, operations, sales and support facilities throughout Asia, Europe and North America. Skyworks website: http://www.skyworksinc.com/
The market centroids plot are the most interesting this month. Four sectors have made significant moves. Industrials has moved across the vertical divide and now resides on the left toward undervaluation while maintaining the same level of year-to-date return. Financials has also moved further undervalued, especially Banks at 93.2$ Fv. Health Care has also joined the crowd on that side of the divide while pulling the median closer to fair value with a higher return. This is a good overall relative directional movement that we hope continues.