As summer comes to a close we thought this would be a good time to talk about the investment world and what we see coming into the fourth quarter.
2017 came in with a bang of enthusiasm and optimism that a new administration would bring "pro-growth” policies and real economic growth. Yet, as the Trump administration’s economic agenda and tax reform initiative have stalled, the growth this year has come largely due to the improvement in global economy and corporate earnings[i]. According to a Bloomberg report dated August 11, 2017, of the 454 companies in the S&P 500 that have so far reported second-quarter results, 68 percent have beaten analysts’ average estimates for revenue and 78 percent have topped per-share earnings expectations.Earnings rose an average of 9.8 percent, while sales have climbed 5.5 percent. The quarter is on pace to post the highest number of S&P 500 companies beating sales estimates in 13 years, according to an Aug. 7 note from Bank of America equity strategists. Earnings beats also are the highest since 2004[ii]. So it appears that equities are poised to continue to their methodical march upward.
Interest rates continue to be range bound. In fact the 10-year Treasury yield has traded with a 32 basis point (0.32%) range for over 90 trading days, the tightest 90-day range in over 45 years. Positioning within futures markets, central bank indecision, and geopolitics have all contributed to rates sticking to their recent range over the last few months[iii]. Even though there is a lot of talk about the Federal Reserve raising rates, the long-term rates still have not started to move. More economic growth and inflation seem to be the only things that will force long term interest rates higher. For now, however, it appears that interest rates are going to remain in a relatively low range.
All of our long-term indicators appear positive and there will need to be a significant correction in equity prices before they would turn negative. For now, we are continuing to be fully invested in both equities and bonds. Should this change we will certainly be adjusting our holdings and letting you all know.
For those of you effected by the flooding in South Texas please know our thoughts and prayers are with you and should you need anything please do not hesitate to let us know.
For those of us not directly affected by the flooding, we would encourage you to be thankful and consider how best you can help our fellow man.
viewpointsObservations and Updates from CCA
Our 10/50 indicator has crossed and confirmed negative today.
As we mentioned in our Market Update on Dec 7th... read more
The fourth quarter of 2018 continues to be a volatile season for the markets. Since this has been such an ‘interesting’ week, we wanted t... read more
October has been another volatile month in the stock market. The theme for 2018 continues to be volatility. As you can see from the chart of... read more
As stated in previous posts, we have been monitoring the bond market and the effect rising interest rates and inflation have on the fixed inc... read more