Peek of the Week
October 17, 2016
The Markets
‘Tis the season!
Third quarter earnings season, that is.
Every quarter,
companies report earnings to let investors know how profitable the companies
were during the quarter.
When profits grow, a company’s share price may move
higher. When profits decline, a company’s share price may move lower.
For five
consecutive quarters, the Standard & Poor’s 500 Index (S&P 500) has been
in an earnings recession – the earnings for the companies in the index have
declined every quarter. Another earnings decline is expected for the third
quarter. As of September 30, analysts estimated a -2.0 percent earnings decline
for the third quarter, according to FactSet.
A
negative estimate doesn’t necessarily mean all S&P 500 companies will do
poorly. Certain sectors of the market have been performing a lot worse than
others. Of the 11 sectors in the S&P 500, only three – Energy, Industrials,
and Telecommunication Services – were expected to have negative earnings. For
example, on September 30, estimates suggested the Energy sector would experience a
year-over-year earnings decline of -67.2 percent, while Utilities would see
earnings growth of +5.3 percent.
Only 7 percent of
S&P 500 companies have shared third quarter earnings so far. Through last
week, Energy sector earnings were weaker than expected (-72.5 percent) and
Utilities earnings were stronger (+6.1 percent). FactSet
detailed S&P 500 companies’ performance through Friday:
“…76 percent have
reported actual EPS [earnings per share] above the mean EPS estimate, 3 percent
have reported actual EPS equal to the mean EPS estimate, and 21 percent have
reported actual EPS below the mean EPS estimate. The percentage of companies
reporting EPS above the mean EPS estimate is above the 1-year (70 percent)
average and above the 5-year (67 percent) average.”
Fourth quarter offers a
brighter earnings outlook. S&P 500 companies are expected to see profits
increase. Analysts’ current estimates suggest earnings will be up 5.3 percent
during the period.
Data as of 10/14/16
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
Standard &
Poor's 500 (Domestic Stocks)
|
-1.0%
|
4.4%
|
7.0%
|
7.6%
|
11.7%
|
4.5%
|
Dow Jones
Global ex-U.S.
|
-1.4
|
1.9
|
-0.5
|
-2.5
|
2.3
|
-0.5
|
10-year
Treasury Note (Yield Only)
|
1.8
|
NA
|
2.0
|
2.7
|
2.2
|
4.8
|
Gold (per
ounce)
|
-0.6
|
17.8
|
6.6
|
-0.9
|
-5.7
|
7.7
|
Bloomberg
Commodity Index
|
0.8
|
9.9
|
-4.2
|
-12.4
|
-10.2
|
-6.4
|
DJ Equity All
REIT Total Return Index
|
1.4
|
8.2
|
12.3
|
11.5
|
14.0
|
5.5
|
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.
maybe
more americans should study communications. Parents aren’t all that comfortable talking with their
children about certain topics. The T.
Rowe Price 2016 Parents, Kids & Money Survey found that sex and death
are at the top of the list, followed closely by family finances. That’s right:
family finances. Parents are more comfortable talking about terrorism, drugs,
and bullying than they are talking about money!
A shortage of conversation may be
at the root of some financial misunderstandings. For instance, when it comes to
paying for college, 62 percent of children (ages 8 to 14) expect their parents
to cover the entire cost of any college the child chooses. Yet, just 12 percent
of parents said they would be able to pay the full cost of college. In
addition, 67 percent of children said their parents are setting money aside so
they can attend college. However, only 58 percent of parents reported they are
saving money to pay for their children’s college.
The disconnect between children’s
expectations and parents’ reality may explain why 16 percent of parent
respondents said they had used retirement savings to pay for college expenses
and 11 percent expect to do so.
Remarkably, college isn’t the only
non-retirement expense where parents have spent their retirement savings. Funds
earmarked for retirement have been used to pay for vacations (17 percent),
holidays (15 percent), day-to-day expenses (13 percent), and weddings (8
percent).
Communication is critical. If you
haven’t talked with your children about money, it may be a good time to start.
There are a lot of resources available to help you. Give your financial
professional a call for advice in this area of your portfolio.
Additionally, if you have been
using retirement assets for other purposes, it may be time to implement and
adhere to a financial plan. Doing so may help you arrive at retirement with
enough money to live comfortably.
Weekly Focus – Think
About It
“Look at market
fluctuations as your friend rather than your enemy; profit from folly rather
than participate in it.”
--Warren Buffett, CEO
of Berkshire Hathaway
Warm regards from Eagan,
Leif M. Hagen
Leif M. Hagen, CLU, ChFC
LP Financial Advisor
Securities offered through LPL Financial Inc., Member FINRA/SIPC.
P.S. Please feel free to forward this commentary
to family, friends, or colleagues.
P.S.S. Also,
please remind your friends and family members becoming Medicare eligible that
we offer Medicare insurance and Part D options with NO COST to work with Leif as
their agent
For more information and resources visit our website at www.HagenFN.com
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For Medicare supplement and part D information and
resources, please visit MEDICAREforSENIORS.info
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* This newsletter was
prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with
the named broker/dealer.
* The Standard & Poor's
500 (S&P 500) is an unmanaged group of securities considered to be
representative of the stock
market in general. You cannot invest directly in this index.
* The Standard & Poor’s
500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect
fees,
expenses, or sales charges.
Index performance is not indicative of the performance of any investment.
* The 10-year Treasury Note
represents debt owed by the United States Treasury to the public. Since the
U.S.
Government is seen as a
risk-free borrower, investors use the 10-year Treasury Note as a benchmark for
the long-term bond market.
* Gold represents the
afternoon gold price as reported by the London Bullion Market Association.
The gold price is set twice
daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in
U.S. dollars per fine troy ounce.
* The Bloomberg Commodity
Index is designed to be a highly liquid and diversified benchmark for the
commodity futures market. The Index is composed of futures contracts on 19
physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT
Total Return Index measures the total return performance of the equity
subcategory of the Real Estate Investment Trust (REIT) industry as calculated
by Dow Jones.
* Yahoo! Finance is the
source for any reference to the performance of an index between two specific
periods.
* Opinions expressed are
subject to change without notice and are not intended as investment advice or
to predict future performance.
* Economic forecasts set
forth may not develop as predicted and there can be no guarantee that
strategies promoted will be successful.
* Past performance does not
guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly
in an index.
* Consult your financial
professional before making any investment decision.
* Stock investing involves
risk including loss of principal.
* To unsubscribe from the
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Sources:
https://corporate.troweprice.com/Money-Confident-Kids/Site/Media/Resources/Articles/2016-pkm-survey-supplemental-results-summary (Slides used are 37 and 53)
https://corporate.troweprice.com/Money-Confident-Kids/Site/Media/Resources/Articles/2016-pkm-survey-results-summary (Slides used are 10, 14, 15, 28, and 30)
