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Market Update: 5-22-17

Jerris Wealth Management Group LPL Research Weekly Market Update

FOCUS ON FUNDAMENTALS

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

What are we telling our investors? Focus on fundamentals. It was an up-and-down week for stocks as market participants became increasingly worried that the Trump administration’s agenda was in danger following the latest news surrounding the Russian investigation. On Wednesday (May 17), the S&P 500 Index suffered its biggest one-day drop in nearly a year (-1.8%), while the Nasdaq Composite (-2.6%) and Russell 2000 Index (-2.8%) suffered even bigger losses.

Stocks then recovered nicely Thursday and Friday (May 18–19) to end the week with only a modest loss, the S&P 500 falling 0.4% for the week. As hard as it is to believe, the index is still less than 1% off its all-time closing high [Figure 1]. Some attributed the late-week rebound to the market’s approval of former FBI Director Robert Mueller as special counsel for the Russia investigation. Perhaps markets got more comfortable with where the investigation might lead. More good economic and earnings data probably helped; it’s difficult to know. But whatever the reason for the rebound, this week we focus on the market’s fundamentals which look pretty good.

Market Update: 5-15-17

Jerris Wealth Management Group LPL Research Weekly Market Update

EARNINGS UPDATE: RAISING THE BAR

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

Excellent earnings season but bar will soon be raised. First quarter earnings season has been excellent by almost any measure. Results beat expectations by more than usual. The overall growth rate is very strong, even without the big boost from energy. The ratio of companies lowering versus raising second (current) quarter earnings forecasts is well above average and guidance has provided better- than-usual support for analysts’ estimates for the balance of 2017. In total, these are all good things.

While we do not want to rain on the well-deserved earnings parade, two potential headwinds are worth noting. One, the comparison to depressed first quarter 2016 earnings was very easy and the bar will be raised over the next several quarters. Two, market participants generally expect fiscal policy to begin to provide an earnings boost around New Year’s, an expectation that has become increasingly tenuous as healthcare reform, other competing priorities, and various distractions have pushed the timetable back.

Market Update: 5-8-17

Jerris Wealth Management Group LPL Research Weekly Market Update

FIVE REASONS NOT TO SELL IN MAY

Burt White Chief Investment Officer, LPL Financial | Ryan Detrick, CMT Senior Market Strategist, LPL Financial

“Sell in May and go away” is probably the most widely cited cliché in stock market history. May is upon us, which sparks a barrage of Wall Street commentaries, media stories, and investor questions every year about the popular stock market adage. This week, we tackle this widely cited seasonal pattern, but focus on some reasons it might not work this year.

Market Update: 5-1-17

Jerris Wealth Management Group LPL Research Weekly Market Update

REFLECTING ON NASDAQ 6,000

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

The Nasdaq Composite hit 6,000 last week, more than 17 years after first reaching 5,000 in March 2000. The road from the first break above 5,000 to the 6,000 milestone was a long one. During the internet boom in the late 1990s, moves from 3,000 to 4,000 and 4,000 to 5,000 were quick, at 56 and 71 days respectively, before the long and winding road to 6,000 over the course of 6,256 days [Figure 1]. But after the 15-year journey back to 5,000 was completed in 2015, the Nasdaq traversed the next 1,000 points relatively quickly to break through the 6,000 level on April 25, 2017.

Even at the big round number of 6,000, the Nasdaq stands on a much stronger foundation today than it did 17 years ago leading up to the dotcom crash. While achieving this milestone has sparked more bubble discussions in the media, here we make the case that Nasdaq stocks are far from bubble territory by comparing various valuation and sentiment measures in today’s market with those back in March 2000.

Market Update: 4-24-17

Jerris Wealth Management Group LPL Research Weekly Market Update

EUROPE ENTERS THE TOUR DE FRANCE

Burt White Chief Investment Officer, LPL Financial | Matthew E. Peterson Chief Wealth Strategist, LPL Financial

The next four weeks will be a major turning point for European investors. France is in the middle of what is arguably its most important election cycle since World War II. The results of the second round of presidential elections, as well as parliamentary elections scheduled for mid-June, will determine if France maintains its historical position as one of the primary advocates for European integration and identity or if anti-European candidates garner additional power. France is both literally and figuratively at the center of Europe, and the concern that it will become more anti-European may be having greater impact on the markets than is apparent at first. Even with pressing political issues, it’s important not to overlook corporate fundamentals, which have also been seeing a meaningful reversal. European corporate earnings experienced a strong rebound at the end of 2016, with consensus expectations from Thomson Reuters of another 20% increase over 2017. These are optimistic forecasts, and though certainly possible, combined with the political uncertainty has kept LPL Research from recommending European equities on a tactical basis.

Market Week: 4-17-17

Jerris Wealth Management Group LPL Research Weekly Market Update

The Markets (as of market close April 14, 2017)

With the United States and many global markets closed for Good Friday, stocks ended the short trading week lower. Trading volumes were low for much of the week, as investors may be concerned with rising tensions overseas in Syria and North Korea, and the continuation of strained diplomatic relations with Russia. Of the indexes listed here, only the Dow's losses were under 1.0%. On the other hand, the Russell 2000 and Nasdaq suffered the largest dips, falling 1.42% and 1.24% respectively.

The price of crude oil (WTI) increased last week, closing at $52.91 per barrel, up from the prior week's closing price of $52.29 per barrel. The price of gold (COMEX) continued to climb, closing at $1,290.10 by late Friday afternoon, up from the prior week's price of $1,256.10. The national average retail regular gasoline price increased to $2.360 per gallon on April 3, 2017, $0.045 higher than the prior week's price and $0.277 more than a year ago.

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Susan Jerris

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LPL Registered Principal 
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