for the week ending May 5 th, 2017

Transcription

1 for the week ending May 5 th, 2017 Market Focus: The S&P 500 was fractionally higher last week as better-than-expected economic data and political progress on the health care law failed to spur much of a rally. The S&P 500 rose 0.63% and is up 7.17% year to date. Last Monday would end up being the most volatile day of last week, as the S&P 500 rose 0.17% on some potentially positive political headlines. The fact that Monday was the biggest move of the week, and the S&P 500 rose just 0.17%, tells you how exciting the remainder of the week was. Tuesday, stocks moved slightly higher again on good European PMIs and progress on an Obamacare repeal/replace vote, although those gains were given back on Wednesday following some underwhelming earnings (AAPL) and a slightly hawkish Fed meeting. The S&P 500 dipped 0.13% on Wednesday. Thursday and Friday stocks drifted sideways in quiet trade. A plunge in oil prices combined with digestion of the Fed statement and looming jobs report kept prices flat on Thursday. Stocks spent most of Friday trading sideways before sprinting into the bell in quiet action to finish at new closing highs after the Goldilocks jobs report. Economic Focus: Nonfarm payrolls rebound Friday s US employment report was fairly upbeat, with 211,000 added to payrolls in April versus a downwardly revised 79,000 in March. The unemployment rate fell to a 4.4%, a 10-year low, though average hourly earnings were restrained, rising a less-than-expected 2.5%. The report paves the way for likely rate hikes from the US Federal Reserve at its June meeting. The Fed earlier this week held rates steady but said weakness in the US economy in the first quarter was likely transitory. Health care reform bill emerges from US House After months of Republican infighting, a bill to repeal and replace Obamacare emerged from the US House of Representatives this week. The bill will likely face a stiff challenge in the Senate, where lawmakers will attempt to fashion a bill under the so-called reconciliation rule that won t require 60 votes for consideration. A Senate vote on the measure is expected to be some months away.

2 This Week Upcoming Economic Focus: Release Date Briefing.com Consensus JOLTS Job Openings May 9 th NA MBA Mortgage Applications May 10 th NA Treasury Budget May 10 th NA Core PPI May 11 th 0.2% Initial Claims May 11 th 242K Core CPI May 12 th 0.2% Retail Sales May 12 th 0.6% Business Inventories May 12 th 0.1% Michigan Sentiment Prelim May 12 th 96.5 Table 1: Briefing.com Earnings Focus: The 1 st Quarter 2017 earnings within the S&P 500 Of the 412 companies that have reported earnings for the 1 st Quarter 2017, 75.2% have reported earnings above analyst expectations. This is above the long-term average of 64% and the average over the past four quarters of 71%. Furthermore, 63.4% of companies have reported Q1, 2017 revenues above both analyst short-term expectations and the longterm average of 59%. The estimated earnings growth rate for the S&P 500 of Q1, 2017 relative to Q1, 2016 is expected to increase 14.7%. When you examine the individual sectors, ten of the eleven sectors are estimated to report a year-overyear increase in earnings relative to Q The Energy and Financials sectors have the highest earnings growth rate for the quarter, while the Telecommunication Services sector has the lowest anticipated growth compared to Q The S&P 500 revenue growth rate is estimated to increase 7.2% for the quarter. The Energy sector is expected to have the highest estimated revenue growth rate while the Telecommunication Services sector is expected to have the lowest. The forward four-quarter (2Q17-1Q18) P/E ratio of the S&P 500 is 17.7, above the fifteen year average. This week May 1, 42 S&P 500 companies are expected to report quarterly earnings. Other News: Puerto Rico filed for a form of bankruptcy this week. The territory is weighed down by approximately $75 billion in debt, making the filing the largest in US history. Detroit s $9 billion filing held the previous record. A decade-long recession, a shrinking population and a dramatically underfunded pension system forced the territory to seek protection from creditors. Thomson Reuters, First Trust, Sevens Report & MFS.

3 Market Momentum Focus: One important aspect to the Harvest Focus is that it will provide you with key information about how various sectors and asset classes are trending relative to one another and also to the broad market. The Market Focus will help you better understand the momentum investment approach utilized by the AlphaSolutions strategies that we employ to help you Harvest Gains and Limit Losses. It will also help demonstrate our rules based investment approach of why specific positions were purchased or held onto and why others were sold. We have highlighted a few of the significant changes from a week ago. There were a few significant movements in the Major Asset Classes and Sectors, the Healthcare Sector moved up 8 ranking 5 th and Cash (1-3 mo T-Bills) moved up 6 ranking 18 th. SmallCap Growth fell 5 to 12 th and MidCap Blend fell 5 to 23 rd. Figure 2 Source: W E Sherman & Co, LLC AlphaSolutions 13/50 Model Update: Current Holdings: Cash 1.0% MoneyMarket MDY 20.0% SPDR S&P MidCap 400 ETF Trust Unit Ser 1 Standard & Poors Deposit Receipt SPY 20.0% SPDR S&P 500 ETF Trust Tr Unit DIA 20.0% SPDR Dow Jones Industrial Average ETF Trust Unit Ser 1 QQQ 20.0% PowerShares QQQ Trust Unit Ser 1 IWM 19.0% ishares Trust Russell 2000 ETF

4 The Big Picture: The big picture is the months-to-years timeframe; i.e., the timeframe in which Cyclical Bulls and Bear operate. Below is a snapshot of the current indicator statuses we closely watch for broad market direction: Figure 3 Source: W E Sherman & Co, LLC US Bull-Bear Equity Indicator this week is 67.34; higher than last week This is a longer term (months to years) indicator for the market direction and is used to establish the equity allocation in many of our AlphaSolution s strategies. Figure 4 Source: W E Sherman & Co, LLC

5 Personal Wealth Enhancer Tip: Remember when you were a kid, things were simple, good, and secure. You kept things in a box, but as you grew older the number of boxes grew until you could not keep track of everything. The Question here is do you know where everything is, or what everything is worth? Because, if you don t know you should, and now you can all in one place instead of having things tucked away in boxes all over the place. You can have a secured location for all your finances and information with daily updates and financial activity. Don t make life difficult by trying to do things on your own, but let us help you with an integrated website that allows you to take control and feel at ease knowing where all your boxes are. Those who know what they have, fare better than most. Click here to watch the video. Click Here to watch the video explanation of the AlphaSolutions Sector Rotation Model by Harvest s Managing Director Tim Newell. The video gives an excellent description of how the model is setup and how all our models are rules based and what kind of protection they can potentially offer you. For More Model Information: AlphaSolutions Models Sources Include (but are not limited to): The Sherman Reports, Sevens Report, First Trust, MFS & Thomson Reuters