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Market Perspective - August 2018

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Market Perspective - August 2018

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Market Perspective - August 2018

  1. 1. Market Perspective – August 2018 Experience Insight Impact Overview: 2nd Quarter earnings season is drawing to a close and once again, stocks in the S&P 500 posted strong earnings and revenue growth. This month we separate the global geopolitical noise from corporate performance metrics and peer into the underlying strength of the economy as a whole. 1
  2. 2. Earnings Update Experience Insight Impact 2 The 2nd Quarter (Q2) continued the trend of strong S&P 500 earnings. Q1 finished with sales up more than 8% and earnings up more than 23%. In Q2, with over 90% of companies having already reported, sales are up 10% and earnings are up more than 25%. As shown below, all eleven sectors of the S&P are showing positive growth. Year-over-year revenue and earnings growth remain very strong. While we are closely monitoring potential impacts from the global trade discussions, at present, most companies are signaling continued optimism for the remainder of the year. Source: Bloomberg
  3. 3. Expectations vs. Reality Experience Insight Impact 3 This chart, which we also shared several months ago, shows the expectation was for 8% sales growth and 20% earnings growth in Q2. In other words, S&P 500 companies once again handily beat even the fairly aggressive expectations that had been set going into the 2nd Quarter. Source: Bloomberg
  4. 4. GDP Uptick Experience Insight Impact 4 While Gross Domestic Product (“GDP”) is largely backward looking, it is worth pointing out that recent stimulus (in part related to tax relief efforts) has caused economic growth to surge. Despite tariff concerns and currency volatility, economic activity remains robust and early indications point to continued strength in Q3.
  5. 5. Employment Continues to Strengthen Experience Insight Impact 5 The unemployment rate remains near historical lows and wage inflation may be taking hold. This would be a signal for the Federal Reserve to continue its plan to keep hiking rates to ultimately “cool off” the economy.
  6. 6. Market Perspective – August 2018 Experience Insight Impact Conclusion: Growth remains strong throughout the U.S. economy with S&P 500 companies continuing to demonstrate significant growth. While we do not dismiss the possibility of geopolitical noise eventually impacting future growth, we currently perceive minimal effect. Expectations for the remainder of 2018 remain for robust growth to continue. As always, we are closely monitoring economic conditions and will adapt portfolio allocations as needed. 6
  7. 7. Disclaimer Experience Insight Impact Opinions expressed in this commentary may change as conditions warrant and is for informational purposes only. Information contained herein is not intended to be personal investment advice for any specific person for any particular purpose. We utilize information sources that we believe to be reliable but cannot guarantee the accuracy of those sources. Past performance is no guarantee of future performance; investing involves risk and may result in loss of capital. Consider seeking advice from a professional before implementing any investing strategy. 7

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