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Perspectives

We Believe That The Bar Is Set Low For An Upside Surprise In The Markets Later This Year

by Fortem Financial May 15, 2018

As investors continue to climb the wall of worry, we believe that the bar is set low for an upside surprise in the markets later this year. Stocks advanced last week as investor confidence in the economic and corporate outlook improved.  Lower-than-expected CPI (Inflation) and PPI (Producer Price Index) numbers,  combined with last week’s report of modest wage growth, eased inflationary concerns.  And, first quarter earnings season continued to outpace analysts’ estimates (more on this below).  Geopolitical news dominated headlines; President Trump announced his decision to withdraw from the Iran nuclear deal and re-impose economic sanctions on the country.  The relatively muted reaction indicated that the market largely anticipated the outcome.  Crude oil prices continued to rally; some analysts believe restrictions on Iranian oil exports could push prices towards $100 per barrel.  Likewise, Energy stocks outperformed; since the end of March, the S&P Energy sector’s 13.8% gain is significantly outpacing the broader index’s 3.3% return.  NAFTA and U.S.-China trade discussions continue.  The Chinese trade delegation arrives in Washington next Tuesday for a second round of trade talks; the meeting takes place shortly before President Trump’s May 21st deadline for a recommended list of tariffs.  Investors, though, seem to anticipate that parties will avoid a trade war with China and ultimately find a resolution on NAFTA.  Finally, the White House announced June 12th as the date, and Singapore as the location, for President Trump’s upcoming meeting with North Korea’s Kim Jong Un.


Earnings season is nearing an end; over 90% of companies in the S&P 500? Index have reported first quarter results.  To date, overall sales have increased 8.6%; sector results were led by Materials (+22.4%); Information Technology (+15.8%); and Energy (+14.4%).  Overall earnings per share have increased 25.6%, including Energy (+95.0%); Materials (+44.1%); and Financials (+29.6%).  The impressive earnings growth effectively reduced the S&P 500? Index’s P/E ratio to 17.2x, a 10.4% decline from its January high of 19.2x.  Volatility has also moderated; the CBOE volatility index is down more than 35% since the end of March.  Meanwhile, according to a recent Wall Street Journal survey, over 92% of economists polled expect the current economic expansion to continue at least into 2020.  Following declines in February and March, and lackluster performance April, stocks have rebounded thus far in May.  The combination of strong corporate earnings results, relatively cheaper market valuations, moderate volatility, and a favorable medium-term economic outlook should enable the recent rally in stocks to continue.

*Source:  Pacific Global Investment Management Company

Chart reflects price changes, not total return.  Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

 

Last Week's Headlines

1. The Producer Price Index for final demand rose 0.1 percent in April, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices advanced 0.3 percent in March and 0.2 percent in February. (See table A.) On an unadjusted basis, the final demand index increased 2.6 percent for the 12 months ended in April.

 

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Brian Amidei, along with Partners Joseph Romano and Brett D'Orlando have also been named *2014, 2015, 2016, 2017, 2018 Five Star Wealth Managers!

Disclosures:
Awards and recognitions by unaffiliated rating services, companies, and/or publications should not be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if Fortem is engaged, or continues to be engaged, to provide investment advisory services; nor should they be construed as a current or past endorsement of Fortem or its representatives by any of its clients. Rankings published by magazines and others are generally based on information prepared and/or submitted by the recognized advisor. Awards may not be indicative of one client’s experience or of the Firm’s future performance. Neither Fortem nor the recognized advisor has paid a fee for inclusion on a list, nor purchased any additional material from the award provider. The criteria for each award is listed below:

Five Star Professional Disclosure:
The Five Star Wealth Manager award is based on 10 eligibility and evaluation criteria: 1) Credentialed as an investment advisory representative (IAR) or a registered investment advisor; 2) Actively employed as a credentialed professional in the financial services industry for a minimum of five years; 3) Favorable regulatory and complaint history review; 4) Fulfilled their firm review based on internal firm standards; 5) Accepting new clients; 6) One-year client retention rate; 7) Five-year client retention rate; 8) Non-institutionalized discretionary and/or non-discretionary client assets administered; 9) Number of client households served; and 10) Educational and professional designations. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or the magazine. The award methodology does not evaluate the quality of services provided. Additional information about this award is available at: fivestarprofessional.com/2016FiveStarWealthManagerMethodology.pdf
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Data Sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market Data: Based on reported data in WSJ Market Data Center (indexes); U.S. Treasury (Treasury Yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness.

Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. The opinions expressed are solely those of the author, and do not represent those of Fortem Financial, LLC or any of its affiliates. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful. Forward looking statements are based on current expectations and assumptions, the economy, and future conditions. As such, forward-looking statements are subject to inherent uncertainty, risks, and changes in circumstance that are difficult to predict. Actual results may differ materially from the anticipated outcomes. Carefully consider investment objectives, risk factors and charges and expenses before investing. Fortem Financial is a registered investment adviser with the SEC. Advisory services are offered through Fortem Financial.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighed index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

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