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Market Update: 10-09-17

THIRD QUARTER 2017 EARNINGS PREVIEW - SLOWER BUT STILL SOLID

Burt White Chief Investment Officer, LPL Financial | Jeffrey Buchbinder, CFA Market Strategist, LPL Financial

Third quarter earnings season gets underway this week (October 9–13) and it should be another good one. The S&P 500 Index has exceeded earnings expectations 33 straight quarters and we see no reason why the third quarter won’t make it 34. However, as seen in Figure 1, earnings growth should fall short of the stellar results and double-digit pace of the past two quarters. We don’t like to lead with the negatives, but some of the reasons earnings growth may slow down this quarter include: ƒƒHurricane impacts. The most visible impact of the devastating hurricanes (Harvey and Irma) late in the third quarter can be seen in insurance company earnings estimates. The property casualty industry within the financials sector may have to absorb more than $100 billion in insured losses during the quarter, which is why financials earnings are expected to fall. Disruptions in other industries in the affected areas (Florida and Texas) such as retail and oil and gas production add to the challenge.

Tougher comparisons. Earnings growth improved significantly from the second quarter of 2016 to the third quarter of 2016 . In the second quarter of 2016, S&P 500 earnings fell 2.1% year over year, compared to the 4.3% year-over-year increase in the third quarter of 2016....

Download the complete PDF with graphs here.

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