CALL: (888) 717-5200 or (949) 861-4747 |  Account View: LOGIN

Market Update: 1-9-17

Jerris Wealth Management Group LPL Research Weekly Market Update

FOURTH QUARTER 2016 EARNINGS PREVIEW:
LOOKS LIKE ANOTHER GOOD ONE

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

Fourth quarter 2016 earnings season gets underway this week (January 9–13), and it looks like it will be another good one. With Alcoa no longer the unofficial kick off of the earnings season, we will consider Friday the start of the season when several big banks with the potential to move the market will report. Here we preview fourth quarter earnings season, which we expect to be another good one, marking the return of earnings growth to the energy sector.

OVERVIEW

Thomson-tracked consensus estimates for the fourth quarter of 2016 are calling for a 6.1% year-over-year increase in S&P 500 earnings. That means based on the typical upside companies generate, near 4%, double-digit earnings growth may be within the realm of possibility. We have several reasons to be optimistic:

  • ƒResilient estimates. Earnings estimates held up very well during the last three months of 2016. Since October 1, 2016, fourth quarter 2016 earnings estimates for the S&P 500 have fallen 2.2%, about half the five-year average of minus 4.3% and 3% better than the 10-year average of minus 5.3%. Fourth quarter estimates for the two biggest S&P sectors, technology and financials, have actually risen since October 1 and over the past month providing encouraging signs. The S&P 500’s 7% jump since Election Day increases the odds that estimates prove conservative, as stocks do tend to signal earnings moves.
  • Improved pre-announcement ratio. The ratio of companies pre-announcing negative fourth quarter 2016 results relative to those pre-announcing positive results, at 2.0, is better than the year-ago quarter (2.9), last quarter (2.3), and the 20-year average (2.7). This ratio suggests a high proportion of companies will exceed estimates, potentially higher than in recent quarters. A solid 71% of S&P 500 companies beat estimates in the third quarter of 2016 with a 4.8% upside surprise.

Market Update: 1-3-17

Jerris Wealth Management Group LPL Research Weekly Market Update

2017 STOCK MARKET OUTLOOK:
GEARS ARE TURNING, BUT PARTS MAY NEED GREASE

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

Earnings are the key to 2017 stock market outlook. S&P 500 earnings passed an important milestone in 2016, returning to growth in the third quarter after mildly contracting for several quarters during an extended mid-cycle earnings recession. Expected mid- to high-single-digit earnings gains from corporate America in 2017 should help support the continuation of the nearly eight-year-old bull market for U.S. equities, and we expect mid-single-digit returns for the S&P 500 in 2017, consistent with historical mid-to-late economic cycle performance.

In addition to earnings growth, we expect those gains to be driven by: 1) a pickup in U.S. economic growth, partially due to fiscal stimulus, 2) stable valuations as measured by the price-to-earnings ratio (a stable price-to-earnings ratio [PE] of 18–19), and 3) an expansion in bank lending. However, gains could come with increased volatility as the economic cycle ages further and interest rates may rise, increasing borrowing costs and making bonds a more competitive alternative to stocks. Risks to our forecast include:

  • a sharp rise in inflation that leaves the Fed playing catch-up; ƒ
  • a trade war with key U.S. trading partners; or ƒ
  • a policy mistake, domestic or foreign, that causes a recession or significant market disruption.

Market Update: 12-19-16

Jerris Wealth Management Group LPL Research Weekly Market Update

A LOOK BACK AT 2016
HITS AND MISSES

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

This week we take a look back at some of our hits and misses of 2016. We certainly had some of both in what was a difficult year to forecast the equity markets. First, the year got off to one of the worst starts ever with a 10.5% stock market correction during the first five weeks of the year as oil prices collapsed. Then we got unexpected election outcomes. In the U.K., the Brexit vote and the stock market’s post-vote resilience were both largely unexpected. Similarly, few predicted Trump’s victory (which apparently surprised even the president-elect himself). That surprise was followed by another—one of the strongest post-election stock market rallies in history.

Against that unpredictable backdrop for stocks, we got some things right and some things wrong. Here is a look back at the hits and misses of 2016.

Market Update: 12-12-16

Jerris Wealth Management Group LPL Research Weekly Market Update

CAN’T STOCKS AND BOND YIELDS JUST GET ALONG?

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

Surging bond yields have not spooked stock market investors. The latest sharp move higher in bond yields has caused stock market investors to ask the question, At what point do higher interest rates potentially begin to hurt stock prices? It is logical to think higher interest rates will eventually slow the economy. Borrowing costs rise and higher inflation—which has accompanied higher interest rates in the past—erodes purchasing power. These are all reasonable points to make when evaluating the relationship between stocks and bond yields. Here we look at this relationship and make the case that, given the still low rate environment, rising interest rates do not put the aging bull market at risk.

Market Update: 12-05-16

Jerris Wealth Management Group LPL Research Weekly Market Update

IRRATIONAL EXUBERANCE
PART TWO?

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

Twenty years ago today, Federal Reserve (Fed) Chairman Alan Greenspan gave his now-famous “Irrational Exuberance” speech at a dinner hosted by the American Enterprise Institute. The phrase was meant to be a warning about stretched valuations of equities during the 1990s bull market. Although his warning was three years early, the market factors Greenspan highlighted eventually did contribute to the dot-com bubble bursting, leading to the first 10- year decline (from 1999–2008) in the S&P 500, including dividends, since the 1930s, which was exacerbated by the early-2000s recession.

Market Update: 11-28-16

Jerris Wealth Management Group LPL Research Weekly Market Update

CORPORATE BEIGE BOOK:
BETTER TONE, LITTLE ELECTION TALK

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

Corporate sentiment improved during the third quarter based on our analysis of earnings conference call transcripts for third quarter 2016 earnings season. We saw greater use of strong and positive words, whereas talk of recession was again virtually non-existent and the election surprisingly garnered relatively little attention. Brexit-related commentary and fewer currency mentions suggest stability in the U.K., while oil and China continued to garner significant attention.

Our Team

Susan Jerris

Susan
Jerris

LPL Registered Principal 
Email Susan
CA Insurance License #0662706
Broker Check
 
Anthony Roble

Anthony
Roble

LPL Registered Administrative Assistant
Email Tony
CA Insurance License #0K61923
Broker Check
 
Diana Esperon

Diana
Esperon

Administrative Assistant
Email Diana
[code][/code]