Markets, Economy

Weekly Kickstart (05/01/2017-05/05/2017)

5/1/17 8:00 AM

/iStock-510081306c.jpgStocks continued higher last week, with the S&P 500 rising by 1.51 percent to 2,384.20. That was the largest weekly gain since February and enough to leave the benchmark index up 6.49 percent 2017-to-date, and just 0.49 percent below the all-time closing high. As for performance during the month of April, the S&P 500 rose by 0.91 percent, a welcome turnaround after March’s 0.04 percent decline but still well below the 2.69 percent average gain seen during the four months immediately following the election. Looking ahead, May has historically been a disappointing month in terms of stock market performance but a continued inflow of positive economic data combined with real progress in D.C. towards tax reform could help push equities to even greater heights.

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One factor behind last week’s rally was the corporate earnings season for the first quarter of 2017. Indeed, as of last Friday, 58 percent of the companies listed in the S&P 500 have reported their profit results for Q1. Seventy-seven percent of these firms have beat their average earnings per share (EPS) estimate, according to FactSet, and 68 percent have beat their mean sales estimate. Moreover, the blended earnings growth rate for the S&P 500 now sits at 12.5 percent. If that holds for the rest of earnings season it will be the highest (year-over-year) earnings growth for the index recorded since Q3 2011, and the first time the index has seen double-digit earnings growth since Q4 2011. The upside surprises reported by Bank of America, J.P. Morgan, Caterpillar, General Electric, and Morgan Stanley were all substantial contributors to the sharp increase in earnings growth. Despite these positives, there are still a handful of potential headwinds for traders to deal with during the next few weeks, e.g. second-round French elections and Congress’s need to quickly pass a spending bill. For retirement investors, though, the focus should be less on the near-term fluctuations in stock valuations and more on the long-term goal of amassing significant wealth. Such efforts can be enhanced with the consistent use of tax-advantaged savings vehicles, dollar-cost averaging, and regularly consulting with a professional financial advisor. As always, we are here to help with any questions you may have.

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To recap a few of the things we learned about the economy last week, the positives included that the nation’s trade deficit narrowed, mortgage and refinance applications rose, new home sales jumped, and private-sector wage growth accelerated. As for the negatives, housing inflation continued to rise, pending home sales fell, demand for American-manufactured durable goods disappointed forecasts, gauges of regional manufacturing activity cooled, consumer confidence moderated, initial jobless claims increased, and U.S. gross domestic product (GDP) during the first quarter of 2017 expanded at the slowest pace in three years. This week the pace of economic data picks up with lots of important reports on housing, manufacturing, inflation, and employment scheduled to be released, including the potentially market-moving April job report from the Bureau of Labor Statistics (BLS) due out this Friday. There will also be handful of speeches from officials at the Federal Reserve following Wednesday’s announcement on monetary policy by the Federal Open Market Committee (FOMC).

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**A more detailed snapshot of the U.S. economy can be found here.**

What To Watch:

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Sources: Econoday, Bloomberg, Twitter, Pension Partners, FactSet, FRBSL

Post author: Charles Couch

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