• Major equity indices mixed
• Volatility picks up late week on news out of D.C.
• Rotation out of growth stocks into value stocks
• Domestic bond yeilds remain range bound

Last week’s trading action in the domestic equity markets was more interesting than the usual weekly grind higher we have experienced most of the year. The Dow rallied nearly 3% for the week while the NASDAQ dropped over .5%. The S& P 500 was up just over 1.5%. It was one of the few weeks all year where news out of D.C. noticeably impacted the markets. This was evidenced Friday as the S&P 500 and Dow dropped almost 1.5% before making back most of the losses. Mike Flynn’s guilty plea in the ongoing Russia investigation and the increasing probability of tax reform being passed meaningfully impacted trading.

For the week the big rise in Dow stocks can be attributed to Telecommunication stocks (think AT&T and Verizon) being bid higher along with Financial issues. Telecommunication issues were up over 6% on the week. Financial stocks rallied once again last week (up 3%-4%) as earnings estimates continue to be revised upward, less regulation is anticipated from Washington, and potential tax cuts seem likely.          

The rise in Telecommunication stocks which (as we have previously noted) has been the worst performing sector this year, appears to reflect a rotation towards value oriented stocks. The other side of the rotation is an exit out of Technology stocks (up the most this year) which typically are the poster child for growth oriented stocks. The rotation out of growth into value stocks last week explains the relatively poor showing for the NASDAQ.

Will the rotation continue? We don’t know, there is no question a lot of clients are taking profits in their winners but at year end institutional fund managers typically do a lot of “window dressing” and this implies upward pressure on the better performing stocks for the year.        

Domestic yields moved little and were also impacted meaningfully by domestic and global news flow (North Korean missile launch).

Next week on the economic calendar: Durable Goods orders for October are reported Monday; ADP Employment Survey Wednesday – Employment Report for November reported Thursday. Friday the University of Michigan Consumer Sentiment Survey is released.

Next week earnings reports are dominated by Retailers:

Tuesday – HD Supply, Land’s End, AutoZone, Toll Brothers, and Barnes & Noble

Wednesday – Hudson’s Bay, American Eagle Outfitters, Vera Bradley, H&R Block, and Brown-Forman

Thursday – Dell technologies, Vail resorts, and Dollar General

Friday – Johnson Outdoors

Indices for the week and YTD are as follows:

S & P 500 up 1.53% for the week; YTD index return is 18.02%

NASDAQ Composite down .60% for the week; YTD index return is 27.20%

Dow Jones Industrial Average up 2.86% for the week; YTD index return is 22.61%

Benchmark 10-year Treasury bond yield stands at 2.36% - virtually flat for the week (+2 basis points)

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Chris McGee heads Caldwell’s investment committee, which draws on a team of experienced in-house professionals and carefully chosen outside analysts to make decisions for client portfolios.

A Chartered Financial Analyst (CFA) and Chartered Alternative Investment Analyst(CAIA), McGee had previously been senior investment adviser and senior vice president at PNC Wealth Management in Sarasota for nearly a decade. Prior to that he was portfolio manager for five years with U.S. Trust (formerly Bank of America) in Sarasota. Before relocating here, he had served as vice president, capital management, for Wachovia Bank in Winston-Salem, North Carolina.

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About Caldwell Trust Company

Caldwell Trust Company is an independent trust company with offices in Venice and Sarasota, Florida. Established in 1993, the firm currently has nearly $1 billion dollars in assets under management for clients throughout the United States. The company offers a full range of fiduciary services to individuals including services as trustee, custodian, investment adviser, financial manager and personal representative. Additionally, Caldwell manages 401(k) and 403(b) qualified retirement plans for employers.