Market Commentary, 07/09/18

The US stock markets rose last week … the Dow was +1.2%, the S&P +1.5% and the Nasdaq +2%. The S&P and Nasdaq continue to outperform the Dow, largely because the Dow is heavily weighted in industrial stocks, i.e., the kind of companies that have been hit by rising trade tensions.

After the Independence Day holiday last Wednesday, the Dow was up 182 on Thursday (07/05) as it appeared trade tensions between the US and Europe may ease. Then on Friday (07/06) the Dow was up 100 in response to the June jobs report, which confirmed our strong labor market. In fact, in June the unemployment rate (4.0%) remained near an 18 year low and the economy added 213,000 jobs (Source: John Hancock), which is more than in June last year. (Bear in mind that an unemployment rate under 5% implies theoretical full employment.)

A few months ago I wrote that when stocks have a strong run-up over a period of time, the markets look for a reason to slow down, pull over to the side of the road and cool down. That also happens the other direction … and even though the stock market is often lackadaisical in summer, it could be that after the past four months of “sideways,” the market is looking for a reason to advance.

Quarterly earnings reports start coming in later this week and very good numbers are anticipated. Analysts estimate that the S&P 500 company’s 2018 Q2 earnings will be up almost 21% over 2017 Q2 and FactSet reports that S&P 500 companies will report earnings increases of 22%. There is some concern that while these numbers are very good, they’re less than the S&P 500 blow-out earnings for 2018 Q1 (+26%) but it should be noted that analysts are usually conservative thus Q2 earnings could be better than these estimates. (Source: Wall Street Journal)

The impact of last week’s jobs and unemployment numbers continue and that, along with anticipation of good earnings reports, pushed stock markets today and the Dow closed up 320, which is Dow +2.25% in the past three days.

Wayne Copelin, CFP®
President, Copelin Financial Advisors, Inc.
514 Brooks Street
Sugar Land, TX 77478
Phone (281) 240-2902
Fax: (281) 240-2856

Securities offered through ProEquities, Inc., a Registered Broker-Dealer and Member FINRA & SIPC Advisory Services offered through Harvest Investment Services, LLC., a Registered Investment Advisor Copelin Financial Advisors, Inc and Harvest Investment Services, LLC are independent of ProEquities, Inc.

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