Ocean Park Capital Management

2503 Main Street

Santa Monica, CA 90405

Main: 310.392.7300

Daily Performance Line:  310.281.8577

February 2018
Market Update
(all values as of 04.30.2024)

Stock Indices:

Dow Jones 37,815
S&P 500 5,035
Nasdaq 15,657

Bond Sector Yields:

2 Yr Treasury 5.04%
10 Yr Treasury 4.69%
10 Yr Municipal 2.80%
High Yield 7.99%

YTD Market Returns:

Dow Jones 0.34%
S&P 500 5.57%
Nasdaq 4.31%
MSCI-Europe 2.05%
MSCI-Pacific 1.82%
MSCI-Emg Mkt 2.17%
US Agg Bond 0.50%
US Corp Bond 0.56%
US Gov’t Bond 0.48%

Commodity Prices:

Gold 2,297
Silver 26.58
Oil (WTI) 81.13


Dollar / Euro 1.07
Dollar / Pound 1.25
Yen / Dollar 156.66
Canadian /Dollar 0.79

Fund Overview

Equities lost substantial ground in February. The Ocean Park funds also declined, but only fractionally, and outperformed all of the major indices. While the technology sector in general was modestly lower, tech stocks in the portfolio — particularly semiconductor stocks — gained ground, bolstering our results.

During February, we added to positions in the technology and health care sectors, and reduced positions in the financial services, producer durables, and consumer discretionary and service sectors. We finished the month at about 89% net long, up from about 87% at the end of January.


A schedule showing the performance of the Investors Fund is included below, along with our Asset Allocation Chart. Daily updates on our activity are available on our Results Line, at 310-281-8577, and current information is also maintained on our website at www.oceanparkcapital.com. To gain access to the site enter password opcap.

*These results are pro forma. Actual results for most investors will vary. See additional disclosures on page 4. Past performance does not guarantee future results.

Equity Overview - February 2018

 Equity Overview

The market volatility which first arose at the end of January gained momentum in February, as 13 of 19 trading days saw gains or losses in the S&P 500 of at least 1%. Early in the month equities retreated by more than 10% from their January peaks, but recovered most of that ground by month’s end.

Notwithstanding that fluctuation, 4th quarter corporate earnings reported in February continued to beat analyst expectations at the blistering pace set in January. With 97% of S&P 500 companies reporting, the blended growth rate was an astonishing 14.8%, even higher than the extraordinary 13.4% rate in January. 74% of companies beat consensus earnings estimates and 77% beat consensus revenue estimates, in both cases higher than their one-year averages.

Equally significant were the increases in analysts’ projections of aggregate S&P 500 earnings for the 1st quarter of 2018 and the calendar year. During January and February, earnings estimates rose by 5.7%, which is the largest increase during the first two months of a quarter since 2002. For the year, estimates rose by 7.3%, which is the largest increase since 1996.





Macro Overview - February 2018

Macro Overview

Economic data reported in February was mostly positive, consistent with a healthy economy.  Manufacturing was strong, as was job growth.  Reflecting a tightening labor market, the unemployment rate was low at 4.1%, and average hourly earnings rose by 0.3%.

On a more discordant note, the administration surprised the markets by announcing broad tariffs on steel and aluminum.  This was applauded in some quarters, but the consensus reaction was alarm over the prospect of a trade war.  Addressing those concerns, the president tweeted that “Trade wars are good and easy to win.”  This sentiment was not shared by our trading partners.

The administration also announced its long-awaited infrastructure plan, proposing $200-billion in federal spending over 10 years with the objective of stimulating an additional $1.5-trillion in investments by private investors and state and local governments.  Commentators were generally skeptical that private investors would be interested or that state and local governments could fund their share of the cost.  The Los Angeles Times editorialized that the strategy “isn’t a plan.  It’s a fantasy.”

Last month, we noted that advocates of the recent corporate tax cut argued that companies would pass the savings along to their employees in the form of higher wages, while opponents cautioned that the lion’s share of the savings would be allocated to stock buybacks—and we also noted that the opponents were correct.  Now there is more evidence.  As of mid-February, the scorecard was:  buybacks $171-billion, wages $5.6-billion.



Additional Disclosures - February 2018

Additional Disclosures

Performance data for OPI reflect the reinvestment of dividends and other earnings on the fund’s assets.  Performance data for the major indices reflect only changes in the value of those indices, and would be higher if dividends were included. However, the index data do not reflect fees that would be paid to index fund managers and transaction costs that would be incurred when their component stocks are bought or sold, while OPI’s data do reflect quarterly fees and expenses incurred by the fund.  The information provided is believed to be reliable, but its accuracy or completeness is not warranted. This material is not intended as an offer or solicitation for the purchase or sale of any stock, bond, mutual fund, or any other financial instrument. The views and strategies discussed herein may not be appropriate and/or suitable for all investors. This material is meant solely for informational purposes, and is not intended to suffice as any type of accounting, legal, tax, or estate planning advice. Any and all forecasts mentioned are for illustrative purposes only and should not be interpreted as investment recommendations.