for the week ending February 2, 2018

Transcription

1 for the week ending February 2, 2018 Market Focus: US Markets recorded its worst week in two years, some of the affects were due to a sharp rise in Treasury yields and underperforming tech and healthcare sectors. The DJIA was hit the worst closing -4.11% followed by the S&P 500 closing at -3.82% and the NASDAQ Composite down -3.51%. Early on last week was a disappointing start, combing Monday and Tuesday the S&P 500 fell nearly two percent. The healthcare sector was primarily affected by State of the Union drug price rhetoric and announcement of Amazon, Berkshire Hathaway and JP Morgan working together to reduce healthcare costs of their US employees. As the week went on US Markets continued to decline as interest rates continued to rise and an increase in jobs report. Despite the sharp market declines the economic reports were primarily positive with positive wage growth numbers and strong payroll. Economic Focus: NAFTA talks advance Meeting in Montreal, negotiators from the United States, Canada and Mexico concluded a sixth round of talks this week. The mood was modestly more upbeat than after prior rounds, with all three nations reporting movement, though US trade representative Robert Lighthizer said progress was very slow. Envoys from Canada and Mexico rejected a key US demand that the NAFTA signatories rework the corporate arbitration system now in place. The US maintains that the investor-state dispute settlement (ISDS) erodes national sovereignty. US nonfarm payrolls increased in January The US Bureau of Labor Statistics reported today that total nonfarm payrolls increased by 200,000 in January, beating expectations of an increase of 175,000. Most of the gains came from construction, food services and drinking places, health care and manufacturing. Average hourly earnings grew more quickly than expected, going up by 2.9% year over year. The unemployment rate remained at 4.1% for the fourth straight month. US oil output surpasses 10 million barrels a day In November, for the first time since 1970, crude oil production topped 10 million barrels a day, the US Department of Energy reported this week. Industry analysts expect production to continue to ramp up amid forecasts for daily output of 12 million barrels by the end of next year.

2 This Week Upcoming Economic Focus: Release Date Briefing.com Consensus ISM Services February 5 th 56.7 JOLTS Job Openings February 6 th NA MBA Mortgage App Index February 7 th NA Initial Claims February 8 th 234K Wholesale Inventories February 9 th 0.2% Table 1: Briefing.com Earnings Focus: The 4th Quarter 2017 earnings kicked off with 251 companies reporting earnings. The start to the earnings season is strong with 78.1% reporting earnings above analyst expectations. This is above the long-term average of 64% and the average over the past four quarters of 72%. Furthermore, 79.7% of companies have reported Q4, 2017 revenues above both analyst short-term expectations of 63% and the long-term average of 60%. The estimated earnings growth rate for the S&P 500 of Q4, 2017 relative to Q4, 2016 is expected to increase 13.6%. 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 Materials sectors have the highest earnings growth rate for the quarter, while the Real Estate sector has the lowest anticipated growth compared to Q The S&P 500 revenue growth rate is estimated to increase 17.7% for the quarter. The Energy sector is expected to have the highest estimated revenue growth rate while the Real Estate sector is expected to have the lowest. The forward four-quarter (1Q18-4Q18) P/E ratio of the S&P 500 is 18.2, slightly above the fifteen-year average. This week February 5, 2018 Ninety-Three S&P 500 companies are expected to report quarterly earnings. Other News: Not all earnings announcements were gloomy. Amazon.com Inc. saw its shares rise 2.8% after announcing its most profitable quarter ever. Amazon credited continued automation of their business as the primary way to keep costs down during the all-important holiday shopping season. Defense contractors Lockheed Martin Corp. and Boeing Co. both had earnings announcements that topped expectations which sent them both up over 1.5% last week while the market was down. In other equity news, Dr. Pepper Snapple Group, Inc., was up over 24% for the week after Keurig Green Mountain Inc. entered into an agreement to buy the beverage company for cash and stock. Looking ahead to next week, earnings season continues with over 90 constituents of the S&P 500 expected to report quarterly results. The information presented is not intended Thomson Reuters, Briefing.com, 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 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 Industrial Sector moved up 3 ranking 6 th and the Healthcare Sector moved up 2 ranking 9 th. The Energy Sector fell 5 to 10 th and MidCap Growth fell 5 to 15 th. AlphaSolutions 13/50 Model Update: Current Holdings: Cash 1.0% MoneyMarket Figure 2 Source: W E Sherman & Co, LLC 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 lower than last weeks 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 or on the play button below to watch the video explanation of the AlphaSolutions 13/50 Trend 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