October 9, 2019
Market Highlights 3Q 2019
The S&P 500 Index finished the quarter with a total return of 1.70% while the Nasdaq Composite gained 0.18% and the Dow Jones Industrial Average finished the quarter up 1.83%. Eight out of the eleven sectors in the S&P 500 posted positive returns during the period. Bond proxies were the top performers with Utilities, Real Estate and Consumer Staples returning 9.33%, 7.71%, and 6.11%, respectively, while Energy, Health Care, and Materials were down 6.30, 2.25%, and 0.12%, respectively, for the period. Large-cap stocks outperformed mid-cap stocks, which beat small-cap names. Specifically, the Russell 1000 Index’s 1.42% gain did better than the Russell Mid-Cap Index which posted gains of 0.48%, which beat the Russell 2000 Index’s decline of 2.41% for the quarter. Growth stocks continued to beat their value counterparts despite a violent rotation into Value in early September, as the Russell 1000 Growth Index rose 0.01% compared to the 3.57% gain of the Russell 1000 Value Index in September. For the quarter, the Russell 1000 Growth Index rose 1.49% compared to the Russell 100 Value Index gaining 1.36% over the same period. Bonds outperformed all equity benchmarks with the Barclays Aggregate gaining 2.27% and the Barclays Long-Term Treasury Index gaining 8.15%. The US Dollar Index lost 3.38% for the quarter, while gold gained 4.19% and Oil was down 7.53%. Bitcoin gave back some ground over the quarter, declining 32.52%, but it is still up 124.29% for the year.
The 3rd quarter of the year started off with the market hitting a new all-time high in July, but was subsequently reversed in August. The S&P 500 is up 20.55% year-to-date, marking the best first nine months of the year since 1997. The yield curve continued to stay inverted despite the Fed cutting rates by a quarter-point in both July and September, bringing down the overnight lending rate to a range of 1.75-2.00%. Opioid producers were hurt over the period as the first trial against drug manufacturers went to court with JNJ losing in the Oklahoma trial with an order to pay $572M, far below the $17B sought. The China-US Trade War continued over the period with Trump planning to impose a 10% tariff (not 25% which was earlier threatened) on an additional $300B in imports, with $125B going into effect September 1st and the remainder effective December 15th. China retaliated on $75B of US Exports with tariffs of 5-10% starting on September 1st and December 15th. Trump responded by increasing the proposed tariffs to 15% from 10% and increasing the current 25% tariffs on $250B of Chinese goods to 30% effective October 1st. China later announced the exclusion of 16 products from its retaliatory tariffs with Trump delaying the increase in $250B of imports to 30% until October 15th. The two countries are scheduled to have high-level talks at the beginning of October. Resolution for Brexit continues to be out of sight as Boris Johnson became Prime Minister and his plan to suspend parliament was ruled unlawful by the Supreme Court. Boris Johnson continues to insist that the UK will leave with a no-deal Brexit at the end of October, however, he is legally bound to ask the EU for a delayed departure if he is unable to get a deal by October 19th. The quarter finished with House Speaker Nancy Pelosi announcing a formal impeachment inquiry of President Trump over conduct related to Ukraine and a whistleblower complaint.
Bill Miller’s 3Q 2019 Market Letter
The views expressed in this commentary reflect those of Miller Value Partners analyst(s) as of the date of the commentary. Any views are subject to change at any time based on market or other conditions, and Miller Value Partners disclaims any responsibility to update such views. The information presented should not be considered a recommendation to purchase or sell any security and should not be relied upon as investment advice. It should not be assumed that any purchase or sale decisions will be profitable or will equal the performance of any security mentioned. Past performance is no guarantee of future results.
©2019 Miller Value Partners, LLC