Summary
On paper, the US stock markets are doing just fine.
But most investors are nervous, and for good reason.
Consider iShares Edge MSCI USA Quality Factor ETF (QUAL) which gives investors exposure to a number of high-quality stocks.
On paper, the US stock markets are doing just fine. Just a few days ago, the three major US indices, Dow Jones (NYSEARCA:DIA), S&P-500 (NYSEARCA:SPY) and Nasdaq (NASDAQ:QQQ) all closed at their record high on the same day. On a year-to-date basis, the Dow Jones and S&P-500 have gained by roughly 6% each while Nasdaq-100 is up 4.2%. In an environment of low bond yields, the stocks could continue moving higher. Yet most investors I've met are nervous, and for good reason.
The second quarter earnings season has almost come to an end, and most of the major companies have beaten Mr. Market's earnings estimates. In fact, as per FactSet, 95% of the S&P-500 companies have reported results so far and more than 70% of those have ended up beating analysts' mean earnings estimates. But that's because estimates were already down. What's particularly upsetting is that earnings have been declining for the last five consecutive quarters. That's something which hasn't happened since the global financial crisis.
In Q2-2016, actual and estimate results translate into 3.2% decline in earnings for the S&P-500. The poor performance has been driven in large part by the persistent weakness in commodity prices which has hurt companies operating in the energy and materials sectors.
Moreover, it appears that profits will likely continue to head lower. For Q3-2016, 102 companies have released earnings guidance, 70% of which have been negative. Analysts foresee a 2% earnings drop in the third quarter and a 0.4% decline for the full year for the S&P-500. This compares against an earnings decline of 0.8% seen last year. But analysts have been reducing earnings estimates. On December 31, the consensus estimate for the S&P-500 called for an earnings growth of 5.9%, which was considerably better than what we are hearing now. The actual results, therefore, could turn out to be far worse.
Read more -
On paper, the US stock markets are doing just fine.
But most investors are nervous, and for good reason.
Consider iShares Edge MSCI USA Quality Factor ETF (QUAL) which gives investors exposure to a number of high-quality stocks.
On paper, the US stock markets are doing just fine. Just a few days ago, the three major US indices, Dow Jones (NYSEARCA:DIA), S&P-500 (NYSEARCA:SPY) and Nasdaq (NASDAQ:QQQ) all closed at their record high on the same day. On a year-to-date basis, the Dow Jones and S&P-500 have gained by roughly 6% each while Nasdaq-100 is up 4.2%. In an environment of low bond yields, the stocks could continue moving higher. Yet most investors I've met are nervous, and for good reason.
The second quarter earnings season has almost come to an end, and most of the major companies have beaten Mr. Market's earnings estimates. In fact, as per FactSet, 95% of the S&P-500 companies have reported results so far and more than 70% of those have ended up beating analysts' mean earnings estimates. But that's because estimates were already down. What's particularly upsetting is that earnings have been declining for the last five consecutive quarters. That's something which hasn't happened since the global financial crisis.
In Q2-2016, actual and estimate results translate into 3.2% decline in earnings for the S&P-500. The poor performance has been driven in large part by the persistent weakness in commodity prices which has hurt companies operating in the energy and materials sectors.
Moreover, it appears that profits will likely continue to head lower. For Q3-2016, 102 companies have released earnings guidance, 70% of which have been negative. Analysts foresee a 2% earnings drop in the third quarter and a 0.4% decline for the full year for the S&P-500. This compares against an earnings decline of 0.8% seen last year. But analysts have been reducing earnings estimates. On December 31, the consensus estimate for the S&P-500 called for an earnings growth of 5.9%, which was considerably better than what we are hearing now. The actual results, therefore, could turn out to be far worse.
Read more -
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ReplyDeleteawesome article very helpful as Forex trading tips
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