S&P Hits High Not Seen Since January

Equities climbed through last week to exceed the S&P 500® Index’s previous high set in January. An expanding economy, coupled with rising earnings, pushed the index up to return more than 12% since a low in early February. Meanwhile, Federal Reserve Chairman Jerome Powell signaled the Fed has no intention of raising interest rates at a faster pace because employment and inflation data remain within their target ranges.

The nine-year bull market has seen plenty of swings lately as global growth, currencies, commodities and geopolitical risks all weigh on investors – along with the drama surrounding indictments of people close to President Donald Trump. The latter situation could signal a power shift in Washington after the November mid-term elections that will shape the market’s outlook in the coming months. At the center of that power is the administration’s policy on trade with China. Talks last week moved away from a compromise and shifted to new tariffs on more than $200 billion in Chinese imports. Trump also championed new restrictions on Chinese investment in the U.S.

The S&P 500 Index was up 0.9% for the week. Its top-performing sectors included Energy (2.6%) and Consumer Discretionary (2.0%), while bottom-performing sectors included Utilities (-1.4%) and Consumer Staples (-1.8%). In the fixed-income market, the 10-year Treasury yield was down slightly, ending at a little less than 2.9%.

We continue to seek companies that reflect our Change-BasedSM investment approach.

Spin-off of V.F. Corp. Brands Should Provide Boost

V.F. Corporation (VFC) designs, produces, procures, markets and distributes branded lifestyle apparel, footwear and related products worldwide. It operates in four segments: Outdoor & Action Sports, Jeanswear, Imagewear and Sportswear. The company has more than 30 brands, including The North Face, Vans, Wrangler Lee, Red Kap, Williamson Dickie and Timberland. The company was founded in 1899 and is based in Greensboro, North Carolina.

V.F. Corporation has a proven track record of successful mergers and acquisitions in footwear and apparel. The company has consistently purchased brands at reasonable prices, increased their profitability and, in some cases, it has grown those brands for decades. After several years of declining sales, V.F. is selectively repositioning its brands, with the biggest change yet to come – a spin-off of Wrangler and Lee into a separately traded company. This move should result in higher growth and provide additional flexibility for V.F. to pursue more profitable acquisitions. We believe this positive change, along with the company’s strong management team, provides a long runway for growth.

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