for the week ending June 9 th, 2017

Transcription

1 for the week ending June 9 th, 2017 Market Focus: Stocks hit fresh all-time highs again last week, as a late-week shift in the Treasury market helped fuel a rally in bank shares that led the markets higher. Still, the S&P 500 slid 0.30% on the week, and is now up 8.62% YTD. Stocks began last week with quiet and sideways trade, as the previous week s rally was digested and investors looked ahead to the busy calendar for the back half of the week. Economic reports on inflation and the service sector were both in line, and did not materially affect equities. On Tuesday, the pullback in stocks accelerated relative to Monday s very quiet trade, but the S&P still only fell 0.28% on the day. News flows were light and stocks seemed to focus on falling Treasury yields, and a flattening curve. Stocks bounced modestly Wednesday with the S&P gaining 0.16% on the session, as positive political developments (National Security Advisor Rogers and Director of National Intelligence Coats both pushed back on the idea that they were pressured by the president on the Russian investigation) offset a substantial slide in oil prices. Additionally, the release of Comey s statement that proved to be largely benign for the administration helped ease some concerns further. Thursday was a day of digestion, and the unchanged status of the S&P at the end of the session underscored that as investors reviewed the ECB statement and the Comey testimony. The biggest development Thursday was the steepening shift in the Treasury market (longer-dated yields rose faster than shorter dated ones) that spurred a notable rally in the financials. That trend continued through the end of the week. Friday, stocks opened higher as the European shares largely shrugged off the shocking UK election results that left the county with a hung Parliament as they continue to navigate the Brexit process. Again the most notable trend in the market was the bear-steepening Treasury market that continued to support financial sector outperformance. Economic Focus: Former FBI chief testifies Former Federal Bureau of Investigation director James Comey testified before the Senate Intelligence Committee regarding the FBI s investigation into Russia s interference in the 2016 US presidential election and President Donald Trump s desire that the Bureau end its investigation of his former national security advisor Michael Flynn. Comey said he would leave it to Special Counsel Robert Mueller to decide whether the president s conduct rose to the level of obstruction of justice. With Mueller s investigation in an early phase, there will likely be many months of continued policy paralysis in Washington.

2 This Week Upcoming Economic Focus: Release Date Briefing.com Consensus MBA Mortgage Index June 14 th NA Retail Sales June 14 th 0.1% FOMC Rate Decision June 14 th 1.125% Philadelphia Fed June 15 th 26.0 Initial Claims June 15 th 240K Building Permits June 16 th 1250K Mich Sentiment Prelim June 16 th 97.0 Table 1: Briefing.com Earnings Focus: The 1st Quarter 2017 earnings within the S&P 500 Of the 498 companies that have reported earnings for the 1st Quarter 2017, 75.3% 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, 62.8% of companies have reported Q1, 2017 revenues above both analyst short-term expectations and the long- term average of 59%. The estimated earnings growth rate for the S&P 500 of Q1, 2017 relative to Q1, 2016 is expected to increase 15.4%. 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 Information Technology 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 7.4% 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 18.1, above the fifteen year average. This week June 12, 3 S&P 500 companies are expected to report quarterly earnings. Other News: Eurozone economy leads the pack Purchasing managers indices released this week show that the eurozone continues to outperform other developed economies. The eurozone composite PMI, which measures both manufacturing and services, stood at 56.8, unchanged from April. Meanwhile, the United States clocked in at 53.6 and the UK at 56.7, just below April s 56.8 three-year high. Japan s composite PMI registered 52.6 and China s 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, Telecom Sector moved up 8 ranking 15 th and the Healthcare moved up 3 ranking 8 th. Emerging Markets fell 2 to 10 th and the Industrial Sector fell 2 to 12 th. 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 68.72; 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