Markets, Economy

Weekly Kickstart (10/16/2017-10/20/2017)

10/16/17 8:00 AM

/iStock-522646895.jpgThe market melt-up continued last week, as the S&P 500 rose by 0.15 percent to 2,553.17. That gain left the benchmark index up a solid 14.04 percent year-to-date, and just 0.08 percent below the all-time closing high. One thing that helped fuel last week’s rally was a handful of positive reports on corporate profits in America. Indeed, the third quarter earnings season has just started but of the companies that already reported their Q3 results, 81 percent have beat their average earnings per share (EPS) estimate, according to new FactSet data, and 78 percent have beat their mean sales estimate. Seven sectors are reporting or are predicted to report year-over-year earnings growth, led by Energy and Information Technology firms, while four sectors are reporting or are projected to report a year-over-year decline in earnings, led by Financial and Consumer Discretionary firms. The value of the U.S. dollar and hurricanes Harvey and Irma were most frequently cited by companies as having a negative impact on Q3 earnings.


Looking ahead, the outlook is a bit more mixed as half of reporting firms have provided positive earnings guidance for Q4 and half have provided negative EPS guidance. That is not too surprising since recent economic reports have been somewhat disappointing, and uncertainty remains elevated surrounding tax reform, monetary policy, and a variety of other issues. At the same time, the CBOE’s VIX volatility index, often referred to as “investors’ fear gauge,” is on track for its lowest monthly close on record. While some traders may consider that to be a contrarian indicator, historically a low VIX has not been a reliable sell signal. What all of this means for equities in the near-term remains unclear but for retirement investors, the focus should instead be on the long-term goal of amassing significant wealth. Assistance with that endeavor is available through 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.


To recap a few of the things we learned about the economy last week, the positives included that retail sales growth improved, consumer confidence jumped, and the number of Americans making first-time claims for unemployment benefits fell back to pre-hurricane levels. As for the negatives, mortgage and refinance applications declined, total job openings in the United States decreased, small business owner optimism moderated, and both consumer and wholesale inflation pressures firmed. This week the pace of economic data slows down but there are still a few important reports on manufacturing and housing scheduled to be released, along with the latest update on regional employment trends this Friday.


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

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

Post author: Charles Couch