The following commentary is an excerpt from the Weekly Roundup to Trifecta Stocks subscribers originally sent on March 10. Click here to learn more about this dynamic portfolio and market information service.
The first week of the second quarter was rather different than the start of the first quarter, with the majority of major U.S. market indices finishing in the red. Only the Dow Jones Industrial Average was relatively unscathed, essentially flat week over week. Given the preponderance of economic data, including today's far weaker than expected March Employment Report, we are not surprised by the market action this week, one that is essentially a "No Man's Land" ahead of corporate earnings season. We'll touch on this more below, but the wide miss in the jobs number was just the latest data point confirming the slowdown of the domestic economy in the first quarter. It's also something that should make for a more than interesting quarterly earnings season after the Easter holiday.
Trifecta had mixed performance this week, but year to date the portfolio is up in nearly every position. Big winners remain AMN Healthcare (AMN) , Facebook (FB) , and Amazon (AMZN) . We had no new additions to the portfolio, but shed CVS Health (CVS) when the shares broke the $77 level.
Next week will be a shorter one as domestic markets are closed for Good Friday. Nevertheless, there will be more economic data to be chewed through and some earnings reports as well before we get to next weekend's candy. Among the reports we'll be watching will be the February JOLTS report for our position in AMN and the March Retail Sales report given our Amazon, Alphabet GOOGL and Foot Locker (FL) holdings.
Also on tap next week are inflation indicators for March, the NFIB Small Business Optimism Index and consumer sentiment indices. Minneapolis Federal Reserve Bank President Neel Kashkari will speak on Tuesday. Considering the data we've been getting over the last several weeks and then today's jobs report, we would have liked to have heard the views of more than just one Fed head next week to decipher when the central bank may next boost interest rates. One month does not make a trend, but the vector and velocity of 1Q 2017 and another month of weaker-than-expected economic data could push talk around the Fed's next interest rate hike into the second half of the year.
With another negative revision in the AtlantaFed's GDPNow forecast for 1Q 2017 to just 0.6%, following today's employment news, we think it will be a volatile earnings season over the coming weeks. For context, GDP in 4Q 2016 was recently revised up to 2.1% and the expectation for President Trump's fiscal stimulus initiatives continue to get pushed out rather than pulled in. We expect companies to reflect all of this in their comments and expectations in the coming weeks. But we think a return of volatility will allow us to buy shares in quality companies at better prices.
While we have no companies reporting next week, we'll be paying attention to quarterly results and guidance from Fastenal (FAST) , Citigroup (C) , and JPMorgan Chase (JPM) as well as Taiwan Semiconductor (TSM) given our position in Applied Materials (AMAT) .
In sum, we see the potential for first quarter-earnings season to be a volatile one that is likely to lead to negative revisions to earnings expectations for at least the current quarter. As such, we will keep our inverse ETF positions in play. We also have ample cash in the portfolio, which we can use to our advantage should such market volatility return in the back half of April.