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Market Update: 9-26-16

Jerris Wealth Management Group LPL Research Weekly Market Update

FIVE FORECASTERS: FEW WARNING SIGNS

Burt White Chief Investment Officer, LPL Financial | Jeffrey Buchbinder, CFA Market Strategist, LPL Financial | Dave Tonaszuck, CMT Technical Strategist, LPL Financial

The Five Forecasters favor the continuation of the current economic expansion and bull market. The Five Forecasters are five indicators that, collectively, have historically signaled increasing fragility of the U.S. economy and a transition to the late stage of the economic cycle, with increased potential of an oncoming recession. Although bear markets (defined as a 20% or more drop in the stock market) are not always accompanied by recessions, more often than not they come together. As a result, we believe these indicators can be used to give some advance warning of a bear market. Currently, these indicators are sending mostly mid-cycle signals (similar to our Cycle Clock from our Portfolio Compass publication). Two of the five indicators are flashing yellow and suggest the cycle has moved past the midpoint, as we suspect, while three indicators are still benign [Figure 1]. Here we review these five indicators, which signal that this now seven-and-a-half-year-old bull market may continue.

Market Update: 8-22-16

Jerris Wealth Management Group LPL Research Weekly Market Update

WHAT THE MARKET IS TELLING US ABOUT THE ELECTION

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

Election years have historically been good for stocks, and this year has been no different, although with less volatility than we would expect during the summer of an election year. That relative calm may partly re ect that the market is increasingly pricing in greater certainty that would come with a Hillary Clinton victory, as her support has climbed in the polls. This week we look at what the stock market and some politically sensitive industry groups may be telling us about the potential outcome of the presidential election in November.

Market Update: 8-29-16

Jerris Wealth Management Group LPL Research Weekly Market Update

CORPORATE BEIGE BOOK:
Q2 OFFERS FEW SIGNS OF IMPROVEMENT

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

Corporate sentiment improved little based on our analysis of earnings conference call transcripts for second quarter earnings season. The message from our earnings recap commentary three weeks ago, “We Were Hoping for More,” is also appropriate for our latest Corporate Beige Book. We did see some signs of improvement in managements’ tone based on the use of more strong words. Talk of recession was virtually non-existent in the U.S., and the Brexit vote in the U.K. was generally not as disruptive as some may have feared. However, the ratio of strong words to weak ones suggests only tentative improvement, while foreign currency remained a drag and low oil prices are still in focus.

Market Update: 8-15-16

Jerris Wealth Management Group LPL Research Weekly Market Update

OVERSEEING POOR EARNINGS OVERSEAS

Burt White Chief Investment Officer, LPL Financial | Matthew E. Peterson Chief Wealth Strategist, LPL Financial | Ryan Detrick, CMT Senior Market Strategist, LPL Financial

Macroeconomics and geopolitics are interesting to discuss, but earnings are what drive markets. We tend to forget that truism when dealing with international markets. The recent Brexit vote and discussions on how, and even if, the United Kingdom will eventually leave the European Union have dominated the news, and especially social media. However, the biggest problems facing developed foreign markets are not politics or economics, but the inability of nonU.S.-based companies to grow earnings and revenue. In Europe, earnings are falling faster than revenue, though expectations have been improving for growth in both metrics. The earnings picture in Japan remains very troubled. Overall, we are looking for a turnaround in earnings and earnings expectations before becoming optimistic on developed foreign equities.

Market Update: 8-8-16

Jerris Wealth Management Group LPL Research Weekly Market Update

EARNINGS UPDATE:
WE WERE HOPING FOR MORE

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

Second quarter earnings season has been okay, but we were hoping for more. S&P 500 earnings are tracking to a 2.6% year-over-year decline in the second quarter of 2016, which means the earnings recession is poised to continue. The quarterly decline would make four in a row according to Thomson Reuters data (by FactSet’s count, the streak is five). Although the numbers for the quarter were not great, there have been some encouraging signs. The technology sector has produced solid results, and forward estimates have been resilient overall. This week we provide an overview of earnings season and discuss prospects for a second half earnings rebound. Later this month we will update our Corporate Beige Book barometer, an analysis of the topics covered in companies’ earnings conference calls.

Market Update: 8-1-16

Jerris Wealth Management Group LPL Research Weekly Market Update

TIME FOR AN AUGUST SWOON?

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

The S&P 500 gained 3.6% during the historically bullish month of July 2016, closing higher for the fifth consecutive month for the first time in two years. It also soared to new all-time highs for the first time since May 21, 2015. As discussed in our Weekly Market Commentary, “Overcoming a Wall of Worries” (June 20, 2016), the list of worries had been long, but we thought an improving economic backdrop coupled with strong market breadth and a very pessimistic sentiment backdrop should help the market resolve higher, which fortunately happened.

Now the big question is, can this strength continue and the S&P 500 close higher in August to make it six straight months of gains? Although we continue to expect an improving economic backdrop in the second half of the year and a stock market with the potential to make more new highs before the year is over, there are some growing near-term concerns — making the odds of some type of a late summer correction more likely. The good news is we do think this weakness will be an opportunity to add to equity exposure and higher prices could still come later this year.

Here are four growing concerns:

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Susan Jerris

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