Up!
Four major U.S. benchmark stock indices closed at record highs for four consecutive days during Valentine's Day week, reported Financial Times (FT).
To date, positive corporate earnings and robust investor confidence have offset fiscal and political uncertainty and helped push U.S. stock markets higher, said sources cited by FT. With 82 percent of companies in the Standard & Poor's 500 Index reporting, corporate earnings are up 4.6 percent for the fourth quarter of 2016, and the Investors Intelligence Advisors Sentiment survey showed bullishness at a 12-year high last week, according to CNBC.com.
While bullish performance is welcome by stock investors, a Barron's article titled, 'Memo to Investors: What Goes Up Must Come Down,' listed the responses of traders at a firm whose chief market strategist asked:
"In order to stay long U.S. equities, you have to believe...what? Here are some answers: Trump's recent troubles are just the typical pains of any new administration. The Federal Reserve hikes rates twice, not three times, in 2017, and the yield on 10-year Treasuries stays at or below 3 percent. Oil prices remain stable. The Street, for once, is too pessimistic on earnings, but since analysts already forecast profit growth of 10.5 percent in 2017 and 11.7 percent in 2018, lower taxes must goose growth.
To this list, [the chief strategist] added the following: Trump doesn't introduce overtly protectionist policies. U.S. growth stays in the 2 percent to 3 percent range until Trump's economic agenda passes Congress. And no geopolitical event either increases global energy prices or dampens U.S. consumer confidence."
Stock markets may be highly valued, but the Conference Board Leading Economic Index, which was designed to determine highs and lows in the business cycle, indicates the U.S. economy is doing well. The index increased for three consecutive months (November through January). The Conference Board's director of business cycles and growth research, Ataman Ozyildirim, said, "The January gain was broad based among the leading indicators. If this trend continues, the U.S. economy may even accelerate in the near term."
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Data as of 2/17/17
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1-Week
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Y-T-D
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1-Year
|
3-Year
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5-Year
|
10-Year
|
|
Standard & Poor's 500 (Domestic Stocks)
|
1.5%
|
5.0%
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22.0%
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8.5%
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11.6%
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4.9%
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|
Dow Jones Global ex-U.S.
|
0.8
|
5.6
|
17.4
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-1.4
|
1.9
|
-1.1
|
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10-year Treasury Note (Yield Only)
|
2.4
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NA
|
1.8
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2.7
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2.0
|
4.7
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Gold (per ounce)
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0.7
|
6.8
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2.3
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-2.3
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-6.4
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6.3
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Bloomberg Commodity Index
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-1.4
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0.7
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15.9
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-12.8
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-9.6
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-6.2
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DJ Equity All REIT Total Return Index
|
0.2
|
2.1
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19.6
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11.0
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10.9
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4.1
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S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron's, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
