Earnings Season Begins

Market volatility continues. Stocks slid on Friday, April 13, but still held on to gains for the week. The S&P 500 increased 1.99%, the Dow added 1.79%, and the NASDAQ was up 2.77%. International stocks in the MSCI EAFE also rose, gaining 1.45%.

Similar to recent weeks, international events continued to sway markets: Concerns about trade disputes affected investor behavior. Meanwhile, escalating conflict in Syria may have weighed on people’s minds.

As we track these developments, we want to share insight about another important occurrence from last week: the beginning of corporate earnings season.

1st Quarter Corporate Earnings Season

1. Expectations remain very high
Analysts anticipate a particularly strong earnings season. Thomson Reuters data predicts that S&P 500 companies’ profits were 18.6% higher in the 1st quarter of 2018 than in 2017. If accurate, this increase would be the largest since 2011.

So far, data seems on track. According to The Earnings Scout, 1st-quarter earnings growth is currently at 26.8%.

2. Banks outperform but stocks drop
On Friday, 3 major banks released their reports—and each beat projections for earnings and revenue. Despite this positive news, however, their stocks experienced sizable declines that contributed to overall market losses.

Why would strong quarterly results create stocks losses?

The markets anticipated this positive performance and had already priced it into the shares. As a result, any less-than-ideal news seemed to outweigh the expected earnings and revenue increases. In particular, 2 facts drove losses:
• 1 bank may have to pay a $1 billion penalty
• All 3 banks experienced slow loan growth

We are in the early stages of earnings season, and many major corporations still need to release their reports. In the coming weeks, we’ll continue monitoring these developments to better understand our economy. As always, please contact us if you have questions about how the data affects your finances and life.

ECONOMIC CALENDAR
Monday: Retail Sales, Housing Market Index
Tuesday: Housing Starts, Industrial Production
Thursday: Jobless Claims

DATA AS OF 4/13/2018 1 WEEK SINCE 1/1/18 1 YEAR 5 YEAR 10 YEAR
STANDARD & POOR’S 500 1.99% -0.65% 14.06% 10.83% 7.14%
DOW 1.79% -1.45% 19.10% 10.38% 7.05%
NASDAQ 2.77% 2.94% 22.42% 16.62% 11.99%
INTERNATIONAL 1.45% -0.41% 14.75% 3.55% -0.21%
DATA AS OF 4/13/2018 1 MONTH 6 MONTHS 1 YEAR 5 YEAR 10 YEAR
TREASURY YIELDS (CMT) 1.64% 1.97% 2.12% 2.67% 2.82%

Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5-year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

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Stocks Mixed, Data Up–Weekly Update for November 20, 2017

Domestic stock performance varied last week, with the S&P 500 and Dow losing ground for the 2nd straight week, while the NASDAQ posted gains. By Friday, the S&P 500 had dropped 0.13%, the Dow gave back 0.27%, and the NASDAQ gained 0.47%. International stocks in the MSCI EAFE stumbled, dropping 0.67%.

Tax reform remained a key focus in the markets, as investors questioned whether changes will happen by the end of 2017. The markets have largely priced in expectations that tax reform will move forward, a belief that has helped drive this year’s record prices. Treasury Secretary Mnuchin expects the President to receive a bill by Christmas, but despite his update, concerns about meeting this deadline remain. This uncertainty—combined with questions about differences between the House and Senate plans—has contributed to the market volatility we’ve seen in recent weeks.

While tax reform may be impacting stocks right now, going beyond the geopolitical debate reveals various positive economic updates.

An Overview of Last Week’s Economic Insight

From housing to industrial production, last week gave us a variety of economic updates for October. Overall, the data indicates that the economy is on solid ground.

• Retail sales grew
Hurricanes are still affecting retail sales, but October’s reading shows decent performance—and analysts expect the holiday season to drive strong results through year’s end.

• Consumer prices increased slightly
Inflation remains relatively low and slow, yet this month’s report shows it moving in the right direction toward the Fed’s goal of a 2% level.

• Industrial production surged
A large jump in manufacturing helped drive industrial growth and indicates a strengthening sector—good news for our economy.

• Housing starts beat expectations
The housing industry experienced strong growth in new permits, construction starts, and completed homes.

What Is Ahead
Tax reform will likely continue to be a hot topic in Washington and the markets. We will follow any changes or updates as they occur, and understanding the economy’s underlying strength will remain our key focus.

As a reminder, with Thanksgiving on Thursday, the markets will only be open for 4 days this week. During this season of gratefulness, we want to thank you for your ongoing trust and reinforce that we are always here to support you on your financial journey.

ECONOMIC CALENDAR
Tuesday: Existing Home Sales
Wednesday: Durable Goods Orders, Consumer Sentiment
Thursday: Markets Closed for Thanksgiving
Friday: PMI Composite Flash

Stocks End Up After Busy Week

Weekly Update – November 6, 2017
Once again, the markets ended the week in positive territory—and all 3 major domestic indexes hit new record highs. The S&P 500 added 0.26%, and the Dow was up 0.45%, with both indexes notching their 8th straight week of growth. The NASDAQ was up for the 6th week in a row with a 0.94% gain. International stocks in the MSCI EAFE joined in the growth, posting a 0.90% increase.

Why did markets continue to perform well last week? In part, economic data, political developments, and policy decisions gave investors a variety of details to digest.

Perspectives We Gained Last Week

1. Tax Reform
The House of Representatives released a long-awaited tax-reform bill on November 2, which included a number of changes to current laws. If passed, this legislation would reduce the corporate tax rate to 20% while cutting in half the mortgage-interest deduction. The markets responded positively to the bill, in part because of the level of detail it included.

Key Takeaway: This tax reform could be significant, but it must pass through several steps ahead before becoming law.

2. Monetary Policy
The Federal Reserve opted to keep interest rates at their current level for now. In addition, President Trump nominated Jerome Powell to be the new Fed Chair when Janet Yellen’s term ends next February.

Key Takeaway: Many people expect one more interest rate increase this year. And if the Senate confirms Powell’s nomination, the Fed may stay with the same centrist approach to monetary policy as in recent years.

3. Jobs
After hurricanes contributed to disappointing jobs data for September, the most recent reading showed improvements in hiring. October saw the economy add 261,000 new jobs—below the predicted 313,000—but positive growth, nonetheless. In addition, we received revised data for September, which indicated the economy gained 18,000 jobs during that month, rather than losing the previously reported 33,000.

Key Takeaway: Hurricanes continue to affect jobs data, but unemployment is now lower than it has been since 2001.

4. Business
The most recent ISM non-manufacturing data shows that many businesses in the service sector are growing. In October, these industries—which range from construction to agriculture—grew at the fastest rate since 2005.

Key Takeaway: With business activity and new orders on the rise, we may expect to see service-sector expansion continue in future months.

After last week’s wealth of data and developments, this week’s schedule is relatively quiet. We will continue to monitor incoming details and determine how they may affect our clients’ financial lives. In the meantime, if you have any questions, we are always here to talk.

Economic Calendar
Tuesday: JOLTS
Wednesday: EIA Petroleum Status Report
Thursday: Jobless Claims
Friday: Consumer Sentiment

DATA AS OF 11/3/2017 1 WEEK SINCE 1/1/17 1 YEAR 5 YEAR 10 YEAR
STANDARD & POOR’S 500 0.26% 15.59% 23.90% 12.85% 5.54%
DOW 0.45% 19.11% 31.28% 12.45% 5.64%
NASDAQ 0.94% 25.66% 33.73% 17.80% 9.18%
INTERNATIONAL 0.90% 19.27% 21.54% 5.58% -1.54%
DATA AS OF 11/3/2017 1 MONTH 6 MONTH 1 YEAR 5 YEAR 10 YEAR
TREASURY YIELDS (CMT) 1.02% 1.31% 1.49% 1.99% 2.34%

Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5-year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

Sources:
https://www.cnbc.com/2017/11/03/us-stocks-apple-earnings-jobs-report.html
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI&region=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX&region=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO
https://www.msci.com/end-of-day-data-search
https://www.cnbc.com/2017/11/03/us-stocks-apple-earnings-jobs-report.html
https://finance.yahoo.com/news/stock-market-news-nov-3-140402004.html
https://www.edwardjones.com/market-news-guidance/recent-news/weekly-recap.html
https://www.edwardjones.com/market-news-guidance/recent-news/weekly-recap.html
http://www.ftportfolios.com/Commentary/EconomicResearch/2017/11/3/the-ism-non-manufacturing-index-rose-to-60.1-in-october
http://wsj-us.econoday.com/byshoweventfull.asp?fid=477894&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

Another Banner Week for Markets

Last week, all 3 major U.S. markets hit record highs once again.[i] The Dow added 2.00% to notch both intraday and closing records, the S&P 500 rose 0.86%, and the NASDAQ gained 0.35%.[ii] International stocks in the MSCI EAFE dipped by 0.32% for the week.[iii]

On Thursday evening, the senate passed the blueprint for a $4 trillion budget.[iv] The vote sets the stage for a tax overhaul that could lower taxes for many families and businesses.[v] In addition, some investors believe the promise of tax cuts could push market valuations even higher.[vi]

Other investors, however, have expressed concern about the continuing market highs. Although the economy is growing and corporate earnings are up, they fear a potential market correction.[vii]

Against this backdrop, last week marked a key milestone in financial history: the 30th anniversary of Black Monday¾the largest single-day market percentage drop in history. Remembering the over 22% loss the Dow experienced that day, some investors may worry about whether the same type of precipitous drop is possible today.[viii]

Why Today Is Different

In the wake of the 1987 crash, regulators implemented a series of “circuit breakers” to avoid anxiety-induced sell-offs.[ix] These rules required a pause in trading if the Dow dropped by 10, 20, or 30%. Since implementing the circuit breakers, only one market-wide pause has occurred¾in 1997.[x]

Over the years, regulators have updated the circuit breakers and connected them to S&P 500 performance rather than the Dow. But their function remains the same: to allow time to help understand and react coolly to dramatic market declines. These rules help prevent unnecessary fear and instability from taking over the markets.[xi]

Putting Performance in Perspective

While the recent market performance is impressive, it is not unprecedented. Hitting record highs doesn’t have to mean that a correction is ahead. In fact, a year after reaching a new peak, the S&P 500 has had positive growth 72% of the time. Rather than allowing fear or euphoria to drive choices, focusing on data and strategy remains important in every market.[xii]

Looking ahead, this week will give us a clearer picture of our economic growth as the first readings of third quarter GDP come out on Friday.[xiii] Many economists are predicting that the data will show another quarter of strong growth.[xiv]

We encourage you to contact us if you have any questions about how market highs may affect your portfolio or long-term strategy. We are here to focus on your financial goals and investments, so you can focus on what truly matters to you.

ECONOMIC CALENDAR

Tuesday: PMI Composite Flash
Wednesday: Durable Goods Orders, FHFA House Price Index, New Home Sales

Thursday: Jobless Claims, Pending Home Sales Index

Friday: GDP, Consumer Sentiment

DATA AS OF 10/20/2017 1 WEEK SINCE 1/1/17 1 YEAR 5 YEAR 10 YEAR
STANDARD & POOR’S 500 0.86% 15.02% 20.26% 12.44% 5.55%
DOW 2.00% 18.04% 28.45% 11.82% 5.61%
NASDAQ 0.35% 23.15% 26.46% 17.14% 9.30%
INTERNATIONAL -0.32% 18.63% 18.92% 5.20% -1.46%
DATA AS OF 10/20/2017 1  MONTH 6  MONTHS 1  YEAR 5  YEAR 10  YEAR
TREASURY YIELDS (CMT) 0.99% 1.27% 1.43% 2.03% 2.39%

Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5-year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

“Do you want to know who you are? Don’t ask. Act!  Action will delineate and define you.”

Thomas Jefferson

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Securities offered through “First American National Advisors, RIA” Member FINRA/SIPC. Wallace R Nichos, IAR. Past performance does not guarantee future results.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Diversification does not guarantee profit nor is it guaranteed to protect assets.

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.

The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indices from Europe, Australia, and Southeast Asia.

The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

Past performance does not guarantee future results.

You cannot invest directly in an index.

Consult your financial professional before making any investment decision.

Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative,

Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

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[i] https://www.cnbc.com/2017/10/20/us-stocks-tax-reform-senate-budget.html

[ii] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI&region=usa&culture=en-US

https://www.cnbc.com/2017/10/20/us-stocks-tax-reform-senate-budget.html

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX&region=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO

[iii] https://www.msci.com/end-of-day-data-search

[iv] https://www.cnbc.com/2017/10/19/senate-passes-a-budget-moving-the-gop-closer-to-tax-reform.html

[v] https://www.cnbc.com/2017/09/27/read-the-full-gop-tax-proposal-here.html

[vi] https://www.forbes.com/sites/adamsarhan/2017/09/28/will-the-tax-cut-send-stocks-higher/#53857bd249bb

[vii] https://finance.yahoo.com/news/could-1987-stock-market-crash-050919703.html

[viii] http://www.npr.org/2017/10/19/558625600/the-30th-anniversary-of-black-monday-a-day-that-made-wall-street-quake

[ix] http://www.npr.org/2017/10/19/558625600/the-30th-anniversary-of-black-monday-a-day-that-made-wall-street-quake

[x] https://finance.yahoo.com/news/could-1987-stock-market-crash-050919703.html

[xi] https://finance.yahoo.com/news/could-1987-stock-market-crash-050919703.html

[xii] https://www.bloomberg.com/news/articles/2017-10-20/a-record-in-records-for-u-s-stocks-rallying-sixth-straight-week

[xiii] http://wsj-us.econoday.com/byshoweventfull.asp?fid=477656&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

http://wsj-us.econoday.com/byshoweventfull.asp?fid=477656&cust=wsj-us&wiconly=1&lid=0#top

[xiv] https://finance.yahoo.com/news/amazon-alphabet-gdp-need-know-week-ahead-162749555.html