Will Earnings Reverse the Market?

The last 2 weeks witnessed stock market indexes reversing to the downside.

Last week, a higher-than-expected monthly CPI reading of .4% apparently surprised investors.  Add in the rumblings of Iran attacking Israel on Friday, knocked the S&P 500 down (1.62%) for the week.  The Dow dropped (2.50%), the Nasdaq (.60%) and the Russell 2000 (2.95%).

Foreign stocks and Emerging markets dropped (2.11%) and (1.97%) respectively.

Bond yields shot higher on the back of the high CPI print with the US 10-Year Treasury finishing the week with a yield of 4.518%.

Over ½ of the higher than anticipated CPI print was caused by the increase in Gas and Housing.  Is that a surprise?

Oil finished the week lower by (1.53%) however is up over 19% for the year.  What happens next with the Israel/Iran, Israel/Hamas situation could impact the pace and the direction of oil.

Week Ahead

Can corporate profits reverse the markets higher?  This week, we’ll hear a small number, however impactful group of company’s report, including Goldman Sachs, United Airlines, J&J, United Health, CSX, DR Horton, AMEX and Proctor and Gamble.

The forward Price to Earnings ratio of the S&P 500 is over 20.  Profits need to pop for the market to move higher, especially now that investors are finally coming to grip the Fed will not be cutting rates 5-6 times this year.  5-6 times is only possible if the economy hits a brick wall, in my opinion. 

In addition to profit reports and wars, we’ll hear March’s retail sales reports, Housing data and Leading Indicators.

Market Predictions

I find it amusing the number of prognosticators out there who attempt to pinpoint where the markets will end the year.

I receive and read a lot of market commentaries and predictions.  Most are filled with bias based on their area of focus.

What is rather common is many larger firms including Goldman Sachs believe the S&P already hit its high for the year.  In January, many firms predicted the S&P would finish 2024 at 5200.  The high so far this year was 5264 on March 28th

With rates apparently higher for longer, inflation not in the rear-view mirror, uncertainly of the war(s), what can you lean on?

Take a ride to a store, a restaurant.  People are continuing to spend large.  If corporate profits continue to accelerate and we keep spending, the markets can go higher, however don’t count on an easy ride.

Tax Day

As another tax-day, April 15th passes, let us be reminded, income taxes are something most of us have in common.  None of us like to pay, however most want what we believe we pay for.

Doing everything possible to legally reduce your income tax bill is certainly recommended.  CPA’s, during tax season are mostly focused on getting done.  After the filing season, it’s a good time to question your CPA to make sure you’re not missing anything for the year ahead.

For those who engage in our tax planning service, we’ll continue to project and discuss your situation as the year unfolds.  As always, we’re happy and prefer to engage your CPA to coordinate all tax planning strategies. 

Please feel free to share our weekly retirement blog with friends, family and colleagues. 

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