-July 26, 2019 Weekly Capital Market Update. For the week, the S&P 500 Index +1.65%, Dow Jones Industrial Average +0.14% and the Nasdaq’s finished +2.26%. With about a quarter of the S&P 500 companies ($SPX) having reported 2Q earnings, 77% have beaten analyst EPS estimates to date; which is above the 5-year average of 72%. However, $SPX is reporting revenue growth of 4.0% in Q2 2019, which would be the lowest revenue growth for the index since Q3 2016. This week the International Monetary Fund (IMF) revised growth projections by increasing GDP in the U.S. from 2.3% to 2.6%. As for China-U.S. trade negotiations, talks are expected to resume next month, and in a sign of good faith, China is resuming imports of certain U.S. products without imposing tariffs. The UK’s new Prime Minister, Boris Johnson, made his intentions clear to implement Brexit by the October 31 deadline - with or without an agreement.
-July 20, 2019 Weekly Capital Market Update. For the week, S&P 500 returned -1.23%, the Nasdaq lost -1.18%, and the Dow Jones Industrial Average declined -0.65%. Heading into earning season, analysts have a downtrodden expectation of -3% decline in earnings. Also, the expected rate cut by the Fed Reserve had already been baked into market valuations with last week's gains.
-July 12, 2019 Weekly Capital Market Update. The markets reacted positively to comments by Fed Chair Powell along with Wednesday’s release of June Minutes which indicated that the Fed would be willing to cut rates if risks and uncertainties “continue to weigh on the economic outlook.” Many interpret those comments - along with "The bottom line for me is that the uncertainties around global growth and trade continue to weigh on the outlook.. In addition, inflation continues to be muted. And those things are still in place” - to suggest a likely -0.25% rate reduction in the Fed funds rate at the meeting slated at month’s end. Accordingly, Dow Jones Industrial Average led all market indices gaining +1.52% followed by Nasdaq +1.01%, and S&P 500 Index +0.78%. This month marks the longest economic expansion in U.S. history, surpassing the previous record holder, which was Mar 1991-Mar 2001. Also, there are positive historical guideposts in place: when stocks have a good first half (and they surely have), then they are 60% more likely to finish the year strongly as well. Second-quarter earnings season opened with a few early reporters with Pepsi (PEP) and Delta (DAL) beating earnings estimates. However, eyes are now focused on next week where there will be 50+ companies reporting, including most major banks; this will offer a better insight on the overall directional health of our economy.
-July 5, 2019 Weekly Capital Market Update. On the holiday truncated trading week the US equity markets closed near their record highs with the S&P 500 +1.7%, the Dow Jones +1.3% and the Nasdaq finishing +1.9%. The positive index returns were partly fueled by news that the U.S. and China agreed to suspend new tariffs and resume negotiations. There is also plenty to be encouraged by in the job market with U.S. labor force participation ticking higher last month with yearly average monthly growth being 172k; the current pace of job growth is also more than sufficient to push the unemployment rate below 3.5% by the end of 2019. The strong rebound in June’s job growth bodes well for consumer spending and GDP growth ahead. The Fed will continue to play the lead role for driving investor expectations while the central bank's responsive policy approach should breathe further life into the current equity valuation expansion. Recall, first quarter 2019 (1QFY19) earnings were expected to decline -2%, but there was actual growth of +1.6%, which is consistent with the “upside surprise” around quarterly SP 500 earnings. For the current second quarter 2019 (Q2FY19) earnings, the expectation is +0.3% increase, but the “actual" Q2FY19 results could be upside surprise again of around +3% range.
-July 20, 2019 Weekly Capital Market Update. For the week, S&P 500 returned -1.23%, the Nasdaq lost -1.18%, and the Dow Jones Industrial Average declined -0.65%. Heading into earning season, analysts have a downtrodden expectation of -3% decline in earnings. Also, the expected rate cut by the Fed Reserve had already been baked into market valuations with last week's gains.
-July 12, 2019 Weekly Capital Market Update. The markets reacted positively to comments by Fed Chair Powell along with Wednesday’s release of June Minutes which indicated that the Fed would be willing to cut rates if risks and uncertainties “continue to weigh on the economic outlook.” Many interpret those comments - along with "The bottom line for me is that the uncertainties around global growth and trade continue to weigh on the outlook.. In addition, inflation continues to be muted. And those things are still in place” - to suggest a likely -0.25% rate reduction in the Fed funds rate at the meeting slated at month’s end. Accordingly, Dow Jones Industrial Average led all market indices gaining +1.52% followed by Nasdaq +1.01%, and S&P 500 Index +0.78%. This month marks the longest economic expansion in U.S. history, surpassing the previous record holder, which was Mar 1991-Mar 2001. Also, there are positive historical guideposts in place: when stocks have a good first half (and they surely have), then they are 60% more likely to finish the year strongly as well. Second-quarter earnings season opened with a few early reporters with Pepsi (PEP) and Delta (DAL) beating earnings estimates. However, eyes are now focused on next week where there will be 50+ companies reporting, including most major banks; this will offer a better insight on the overall directional health of our economy.
-July 5, 2019 Weekly Capital Market Update. On the holiday truncated trading week the US equity markets closed near their record highs with the S&P 500 +1.7%, the Dow Jones +1.3% and the Nasdaq finishing +1.9%. The positive index returns were partly fueled by news that the U.S. and China agreed to suspend new tariffs and resume negotiations. There is also plenty to be encouraged by in the job market with U.S. labor force participation ticking higher last month with yearly average monthly growth being 172k; the current pace of job growth is also more than sufficient to push the unemployment rate below 3.5% by the end of 2019. The strong rebound in June’s job growth bodes well for consumer spending and GDP growth ahead. The Fed will continue to play the lead role for driving investor expectations while the central bank's responsive policy approach should breathe further life into the current equity valuation expansion. Recall, first quarter 2019 (1QFY19) earnings were expected to decline -2%, but there was actual growth of +1.6%, which is consistent with the “upside surprise” around quarterly SP 500 earnings. For the current second quarter 2019 (Q2FY19) earnings, the expectation is +0.3% increase, but the “actual" Q2FY19 results could be upside surprise again of around +3% range.
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