Weekly Investor – March 21, 2016
Fed Stresses Improving U.S. Economy
U.S. equity markets ended the week in positive territory. The S&P 500® Index closed the week at 2049.58, returning 1.4%. Year-to-date, the S&P 500 has returned .80%, trades at a P/E ratio of 18.5 and carries a dividend yield of 2.2%. Oil provided a bright spot last week and the West Texas Intermediate crude oil closed the week at a spot price of $39.44 per barrel, gaining 2.44%. This represents a more than 50% increase from the February lows of $26.21 per barrel. As a result, many energy related names performed well last week. The Fed met last week and cut the number of expected interest rate increases. The latest “dot plot” indicated only two projected increases compared to the four proposed increases in the December 2015 meeting. Additionally, the Fed cited risks of a weakening global economy, which could spill over domestically. However, it stressed that the U.S. economy is still improving. Looking ahead to this week, investors prepare for the last full week of first quarter of 2016 and hope to end on a good note going into earnings season.
The S&P 500® Index was up 1.4% for the week. The top-performing sectors in the S&P 500® Index included Industrials (3.4%) and Energy (2.5%), while bottom-performing sectors included Consumer Staples (0.8%) and Health Care (-2.0%). In the fixed-income market, the 10-year Treasury yield was down during the week, ending at 1.9%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
Favorable Odds
Lincoln National Corporation (LNC) engages in multiple life insurance and retirement businesses within the United States and sells a range of wealth protection, accumulation and retirement income products and solutions. LNC was founded in 1904 and is headquartered in Radnor, Pennsylvania.
Similar to its industry peers, LNC’s profit has been significantly impacted by the low interest rate environment. However, improving economic signals are currently leading the Federal Reserve to slowly reverse its monetary policy. This change should lead to a gradual climb in interest rates and thus a much improved operating environment for LNC. Additionally, the improving U.S. economy indicates higher potential demand for LNC’s products. We believe LNC is well positioned to benefit from steady U.S. economic improvement and offers favorable odds to our clients.
Top 10 Equity Holdings
| . | |
|---|---|
| Alphabet, Inc. (Google, Inc.) | 7.1% |
| Post Holdings, Inc. | 5.9% |
| Danaher Corp. | 4.4% |
| Masco Corporation | 4.3% |
| ConAgra Foods, Inc. | 4.1% |
| Baxter International Inc. | 3.8% |
| CBS Corporation | 3.7% |
| Skyworks Solutions, Inc. | 3.6% |
| Red Hat, Inc. | 3.6% |
| C.H. Robinson Worldwide | 3.5% |
This newsletter presents selected recommendations from portfolio managers of Argent Capital Management LLC, a registered investment advisor. Opinions reflect the portfolio manager’s judgment on the date above and are subject to change. A list of stocks recommended by Argent is available upon request. You should not assume that these recommendations are or will be profitable. In the course of it’s business, Argent’s client accounts may be buying and selling these stocks.
