May Economic Update
In April, investors kept one eye on impressive corporate earnings and another on geopolitical developments in Asia and Europe. In the end, earnings ultimately drew the most attention with the Dow Jones rising over 1% for the month. Consumer confidence remained high, China and the Eurozone reported encouraging economic news, and U.S. home sales once again rose. All in all, the month featured more economic positives than negatives. (1)
The U.S. & Global Economic Health
An extremely bullish stock market climate and abundant consumer confidence often coincide and April proved no exception. The nation’s most-watched consumer confidence indices remained high but did have a slight pullback from March. Declining inflation of 0.3% and lower consumer prices also contributed to the positive consumer sentiment. (2)
Last month also brought encouraging news from China with the country’s economic growth improving to a 6.9% pace – the highest seen in over a year and a half. Also taking part in the bullish rally were the European markets: France’s CAC 40 index was up 4.38%, Spain’s IBEX 35 gained 3.15%, and the German DAX increased by 2.38%. (3,4,5)
U.S. Corporate Earnings
On April 28, FactSet estimated 12.5% blended earnings growth for companies in the S&P 500. If that projected annualized growth rate holds, Q1 will turn out to be the best quarter for earnings growth in nearly six years. Earnings gains will certainly vary over succeeding quarters, but for the near term, this story of solid growth may continue to be the narrative. (6)
What Lies Ahead for May?
In early May, all eyes will be on the Department of Labor’s latest jobs report, the Federal Reserve’s policy statement, and the tax bill in the U.S. congress. All of these events will act as leading indicators for the market moves which lie ahead for this summer. Many investors are looking at the markets through a bullish lens, while others are anticipating profit taking and some reversion back to the mean. Barring an unforeseen event, the “bulls” appear ready to run for yet another month. (6)
Citations:
1.) markets.wsj.com/us [4/28/17] 2.) marketwatch.com/economy-politics/calendars/economic [5/1/17] 3.) reuters.com/article/us-china-economy-gdp-idUSKBN17J04E [4/17/17] 4.) ec.europa.eu/eurostat [4/29/17] 5.) markets.on.nytimes.com/research/markets/worldmarkets/worldmarkets.asp [4/28/17] 6.) insight.factset.com/earningsinsight_04.28.17 [4/28/17]
This post has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Bob Lawson is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
