Perspectives

Midterm election years have historically been the most volatile year for stocks in the four-year presidential cycle. The average intra-year decline for the S&P 500 in a midterm election year is 19 percent, much higher than the 12-13 percent average in the first, third, and fourth years of the cycle. We would argue that monetary policy is generally tighter in a midterm election year and presidents pursue anti-growth policies to rally their bases. Today’s equity market fits the historical pa… View More

Numbers do not lie, and the inflation numbers for August were released this morning. Today’s Inflation (CPI) numbers show Inflation in August went up from the previous month. The market is selling off today because the bond market is adjusting to the prospect of the Federal Reserve raising rates at their next meeting by at least 75bps. With inflation at these levels, the FED will need to continue to raise rates to stem off inflation making the prospects of a soft landing fade. The U.S. CPI ro… View More

U.S. equities rallied this week (S&P 500 +3.7%) to break three-straight weekly declines. The gains were driven by factors including oversold conditions, some more traction in the peak-inflation narrative, and firmer labor market data. Treasuries sold off sharply with the curve flattening. Best sectors were consumer discretionary (+5.6%) and materials (+5.0%); worst sectors were energy (+0.7%) and consumer staples (+1.9%). Source: Bob Doll Chief Investment Officer Crossmark Investments C… View More

2023 Earnings Decline Paused For Now After falling roughly $9 during the 2Q reporting season, the 2023 earnings estimate has stabilized at approximately $243.50, with 2023 earnings growth expected to be about 8%. However, we continue to believe that earnings estimates for 2023 are too high, and expectations will once again be revised down during the 3Q reporting season. Financials & Discretionary Expected To Increase Their Contribution In 2023 Considering the sector contributions for 20… View More

The Dow Jones Industrial Average fell more than 1,000 points last Friday, caused apparently by Fed Chairman Jerome Powell’s attempt to use a brief speech to channel the ghost of Paul Volcker. Obviously, this was part of the market’s worries, but the stage was set when the Biden Administration announced a student loan forgiveness program last week. The more we learn about this, the worse it looks. The executive order would send an already very bad student loan system – a system designed mo… View More

Consistent with the frenetic pace of modern life, a technology-inspired need to achieve instant gratification, and virtually endless amounts of free money, it is difficult for all of us as investors to have the patience to allow economic developments to play out over time. In our defense, who could blame us? Fed tightening in late 2018 led to a brutal sell-off in stocks before Christmas. Two weeks later, Chairman Powell might as well have brought chocolate and flowers to the floor of the New Yor… View More

Equities were sharply lower last week with the S&P -4.0%, its worst week in ten. Friday’s Fed Chair Powell’s Jackson Hole speech was the catalyst for the significant Friday decline as he signaled that the Fed is willing to risk recession to lower inflation. Best performers were energy (+4.3%), materials (-1.3%) and utilities (-2.6%). Worst sectors were technology (-5.6%), communication services (-4.8%) and consumer discretionary (-4.7%). We recognize that we send out a lot of material. … View More

Equities declined last week (S&P 500 -1.2%) with the bulk of the decline coming toward the end of the week. The decline came after four straight weeks of gain. Downside occurred due to Fed commentary indicating determination to fight inflation and therefore more rate increases. Downward earnings revisions and stretched valuations were also of concern. Best sectors were consumer staples (+2.0%), utilities (+1.3%) and energy (+1.3%). Biggest decliners included communication services (-3.3%), m… View More

Second Quarter Earnings Better Than Expected In Aggregate… With over 90% of companies reporting earnings for the second quarter, aggregate EPS growth of 9.7% for the S&P 500 is well above the original estimates of 5.6%. The energy sector provided a significant boost; however, 8 of the remaining ten sectors also beat their initial estimates. In addition, revenue growth of 13.7% was also better than expected. …But 2023 Earnings Per Share Estimate Being Revised Lower In our opinion, th… View More

Stocks were mixed last week (S&P 500 +0.4%). The most notable event for the week was the hot jobs report on Friday as the Fed continued to push back talk of a Fed pivot post the turn of the year. Best sectors were technology (+2.0%), consumer discretionary (+1.2%) and communication services (+1.2%); worst sectors were energy (-6.8%), real estate (-1.3%) and materials (-1.3%). At full employment, U.S. job growth should be slowing – we’re still waiting. U.S. nonfarm payrolls surged +528… View More