Top Five for July 2017

Transcription

1 Top Five for July 2017 By: James Hickey, CFA Chief Investment Strategist The information and opinions in this report were prepared by James Hickey, Chief Investment Strategist for HD Vest Advisory Services (HDVAS). Information and opinions have been obtained or derived from sources considered reliable, but their accuracy or completeness cannot be guaranteed. This represents James Hickey s opinion as of the date of this report and is for general information purposes only. HD Vest Financial Services and its affiliates do not undertake to advise you of any change in opinion or the information contained in this report. Reports and opinions prepared by other sources may be inconsistent with, and may reach different conclusions from, this report. The information is provided for educational purposes only. HD Vest Financial Services and its affiliates do not provide legal advice. Please consult your legal advisors to determine how this information may apply to your own situation. HD Vest Investment Services SM does not provide tax advice. Whether any planned tax result is realized by you depends on the specific facts of your situation at the time your tax preparer submits your return. The information presented is not an offer to buy or sell, or a solicitation of an offer to buy or sell the securities or strategies mentioned. The investments discussed or recommended in the presentation may be unsuitable for some investors depending on their specific investment objectives and financial position. Investors should consult with their Advisor regarding their specific situation.

2 Executive Summary 1. The GDP continues its strong run with an estimated 2.6 annualized real return for the last quarter. 2. Continued strong corporate earnings for Q2. 3. Oil has quietly rebounded from the bottom. 4. Dollar continues to decline from its peak. 5. Brace yourself for August and September.

3 1. GDP continues its strong run with an estimated 2.6 annualized real return for the last quarter. a. Continued strong run where 30 of the last 32 quarters GDP has grown. All fundamentals are strong. b. Unemployment down to 4.3%. US added 209K jobs in July, beating expectations of 180K. c. US Government annual deficit projected to be $570B/yr down $15B from prior year and down almost 65% from the peak in 2011 of $1.3T. d. US trade deficit dropped 6% to an 8 month low in June. Source: FactSet Gross domestic product (GDP) is the monetary value of all the finished goods and services produced within a country s borders in a specific time period. Though GDP is usually calculated on an annual basis, it can be calculated on a quarterly basis as well (in the United States, for example, the government releases an annualized GDP estimate for each quarter and also for an entire year). GDP includes all private and public consumption, government outlays, investments, private inventories, paid-in construction costs and the foreign balance of trade (exports are added, imports are subtracted). Put simply, GDP is a broad measurement of a nation s overall economic activity the godfather of the indicator world.

4 2. Continued Strong Corporate Earnings for Q2 a. 73% of S&P 500 companies report earnings above analyst expectations. b. Revenue grew 5.2% from same period last year (April June 2016). This is the second strongest growth in the past 5 years. c. Earnings have climbed 9.1% compared to same period last year and every S&P 500 sector outside of telecommunications shows quarter over quarter revenue growth. d. Energy and IT are the primary drivers, but there was positive performance across the board except telcoms. * Source: FactSet *Cons. refers to consumer The S&P 500 is an index of 500 major, large-cap U.S. corporations. You cannot invest directly in an index.

5 3. Oil has quietly rebounded from the bottom a. Oil up 88% from bottom in Jan b. North American rig count doubled in a year. Market bottomed at $27.88 on Jan 20, 2016 Source: FactSet Brent Crude is a major trading classification of a sweet light crude oil that serves as a major benchmark price for purchases of oil worldwide. This grade is described as light because of its relatively low density, and sweet because of its low sulphur content. Brent Crude is extracted from the North Sea and comprises Brent Blend, Forties Blend, Oseberg and Ekofisk crudes (also known as the BFOE Quotation). The Brent Crude oil marker is also known as Brent Blend, London Brent and Brent petroleum.

6 4. Dollar continues its decline from peak a. Dollar peaked at the 2016 Presidential election but still high compared to historic levels. b. In the short term, this is beneficial to investors because it is driving returns in international bond and equities market. c. In the short term, this helps US companies with their international trade. d. In the long term, however, a weak dollar hurts foreign economies due to the trade balance and can lead to inflation in the US. *Ice Dollar Index is a formal index comparing the US Dollar to a basket of foreign currencies. It is heavily weighted to the euro and yen. *Source: FactSet

7 5. Brace yourself for August and September a. Historically August and September are the two worst months for returns. b. The January effect is real, but December is the best month of the year. S&P500. Data from Moneychimp. Average by month including data from

8 Important Disclosures and Other Definitions Investments are subject to market risks including the potential loss of principal invested. Diversification does not assure or guarantee better performance and cannot eliminate the risk of investment losses. An investment cannot be made directly into an index. The HD Vest Affiliate companies exclusively provide financial products and services, and do not provide or supervise tax or accounting services. Advisors may provide tax, accounting or other services through their independent outside businesses, but these services are separate and apart from HD Vest. International investing involves special risks due to specific factors such as increased volatility, currency fluctuations and differences in auditing and other financial standards. The S&P 500 is an index of 500 major, large-cap U.S. corporations. The consumer discretionary sector consists of businesses that have demand which rises and falls based on general economic conditions such as washers and dryers, sporting goods, new cars, and diamond engagement rings. The consumer staples sector consists of businesses that sell the necessities of life, ranging from bleach and laundry detergent to toothpaste and packaged food. The energy sector consists of businesses that source, drill, extract, and refine the raw commodities we need to keep the country going, such as oil and gas. The financial sector consists of banks, insurance companies, real estate investment trusts, credit card issuers, and a host of other money-centric enterprises that keep the debits and credits of the economy flowing. The health care sector consists of drug companies, medical supply companies, and other scientific-based operations that are concerned with improving and healing human life. The industrial sector consists of railroads, airlines, military weapons, and industrial conglomerates. The Information Technology, or IT, sector is home to the hardware, software, computer equipment, and IT services operations. The materials sector consists of building blocks that supply the other sectors with the raw materials it needs to conduct business, the material sector manufacturers, logs, and mines everything from precious metals, paper, and chemicals to shipping containers, wood pulp, and industrial ore. The telecommunication services sector consists of telephone services and high speed internet. The utilities sector of the economy is home to electric, gas and water utilities. HD Vest Financial Services is the holding company for the group of companies providing financial services under the HD Vest name. Securities offered through HD Vest Investment Services SM, Member SIPC, Advisory services offered through HD Vest Advisory Services SM, 6333 N. State Highway 161, Fourth Floor, Irving, TX 75038,