October 2017- Earnings, Earnings, Earnings

This year has been been an odd year with hurricanes, political squabbling, and most recently the tragedy in Las Vegas.  A lot of difficult things have happened this year with the hurricanes and the recent Las Vegas shooting.

The story I'd like to focus on is that of the S&P 500 earnings, which has been under the radar.   In my opinion, much of the productivity in the market has come from the strong earnings we've seen in 2017. 

  • "Of the 499 companies in the S&P 500 that have reported earnings to date for Q2 2017, 73.3%have reported earnings above analyst expectations. This is above the long-term average of 64%and above the prior four quarter average of 71%" -*see source reference at the bottom of the email.
**see source reference at the bottom of the email.

While quarterly earnings have been above expectations, there is some concern about the market being fully valued.  In other words, there is not a lot of room left to run unless the earnings trend continues it's pace or we see some action in the political realm.  Tax reform and infrastructure spending seems to get the market excited but we will see if Washington can compromise to get something done on these agendas.  There might be some premium baked into the market hoping for tax reform and an infrastructure plan.

The big picture is that the US economy is doing well and the market is reflecting strong earnings of 2017.  The market will make investors nervous after strong runs but predicting events that will influence the market is nearly impossible.  Recently, I attended a conference where some market-timing firms were selling their investment services.  It seemed many of these firms had one great year beating the averages and making investors take notice, however over longer periods the returns normalized and came in line with the benchmark's.  It reminded me that staying the course on any strategy is very important, the investor that tends to get frustrated yearly ends up chasing returns.  So while the market has done well it doesn't mean there should be a call to action, it might mean things are going to plan. 

Analyzing stock market performance can become an endless tail chasing game, seeing the big picture to make sure you're on the right track is what is important.  If you have questions about your path to retirement or any financial goal please call me so we can discuss!
 
DISCLAIMERS:
1. Past performance is not indicative of future results.
2. Historical performance is no guarantee of future performance.
3. Diversification does not guarantee profit nor is it guaranteed to protect assets.

Sources:
*http://lipperalpha.financial.thomsonreuters.com/2017/09/sp-500-17q1-earnings-dashboard/
**https://am.jpmorgan.com/us/en/asset-management/gim/adv/insights/guide-to-the-markets/viewer

https://www.forbes.com/sites/chuckjones/2017/07/22/sp-500s-revenue-and-earnings-growth-on-a-solid-but-underwhelming-upturn/#49a185823757

http://www.investopedia.com/terms/m/markettiming.asp

Subscribe to our mailing list

* indicates required
Email Format