Corporate earnings took center stage this week as financial markets digested a multitude of 1st quarter results. Over half of the S&P 500 companies have reported results this season and 74 percent have exceeded analyst expectations, causing analyst to turn more bullish on forward earnings. Profits at S&P 500 companies also gained 1.1 percent year-over-year, a slight increase over initial estimates.
The U.S. economy grew at an annualized rate of 2.5 percent in the first quarter, which was lower than forecast. However, consumer spending, which accounts for the largest portion of GDP, grew by the most since 2010. This is a positive catalyst for financial markets and shows that consumers appear to be less effected by the payroll tax cut reversal and increase in taxes than initially estimated. Continue reading
Our thoughts and prayers are with the people impacted by the Boston Marathon Bombing and chaos thereafter.
The pullback we have been anticipating started this week. This was triggered by a number of inconsistent economic data points combined with the shock of the attack in Boston.
The Conference Board reported that its index of leading economic indicators fell 0.1% in March, the first decline since August of last year and below the consensus growth estimate of 0.1%. First-time claims for unemployment benefit insurance rose by 4,000 to 352,000 for the week ended April 13, in line with the consensus estimate. Continue reading
We mentioned in several of our most recent commentaries that we could see the markets have a short term correction in the near term. This possibility will certainly be on the minds of investors as the reminders of the “April swoon” from last year will be discussed by the media. What are the implications for investors? Without uncertainties, there would not be opportunities. As we have noted in the past, bull markets do not announce themselves. The key is to look through the short-term noise and maintain focus on the big picture. In 1982, there were many factors keeping investors on the sidelines—unemployment of more than 16%, soaring oil prices on the back of the Iranian Hostage crisis, skyrocketing interest rates, near-20% mortgage rates and plummeting home sales. In short, if things feel bad today, they were awful then. But it was also the eve of the greatest secular bull market in American history. Those who waited till everything felt good again missed an enormous amount of upside. Continue reading
As the first quarter of 2013 comes to an end the S&P 500 currently sits at a record high. Since hitting an intraday low of 666.79 in March 2009, the S&P 500 has rallied 135 percent. This performance, however, has been accompanied by a lackluster recovery in the overall economy.
This recent market rally can be attributed to aggressive monetary policy by the Fed and record profits from US companies. Despite some apprehension among several Fed members, the Central Bank recently agreed to maintain their accommodative monetary stance of purchasing $85 billion in monthly bond purchases. Continue reading