Lindsey Report August 2017

The equity markets (as measured by the Dow, S&P 500 and the Nasdaq) have all bucked the trend of doing poorly during the summer months: at least thus far. Despite the many geopolitical concerns and the ridiculous political environment in the U.S., the equity markets have apparently kept their eyes focused on other issues: thankfully!

For instance, on 7/28, the Bureau of Economic Analysis released their first of several estimates for 2nd Quarter GDP (Gross Domestic Product): the figure was a positive 2.6%. This suggests the economy picked up steam in Q2 and continues to grow.

The economy was lifted by increases in consumer spending, increased business investment and shockingly, increased exports. The report also noted that “real disposable personal income”, which means what people have to spend, increased by more than 3%.

Also fueling the rise in equity prices has been corporate earnings. Again, equity prices “should” reflect the strength of a company’s earnings and the health of their business. While many may argue that values are high or at the high end, at least corporate earnings have been strong.

For instance, with 447 of the 500 S&P companies to report earnings, second quarter earnings are expected to increase by over 11% compared to same period last year. This would also be the first time in almost six years that we have had back-to-back quarters of double-digit earnings growth (Thomson Reuters).

I’m pleased to see valuations at these levels, the economy doing well and corporate profits rising. I’m also a realist. At some point, geopolitical events and/or governmental “dysfunction” could negatively impact the markets. When, if and to what extent these potential events impact our markets, is an unknown. Hopefully, we can navigate these murky waters, calm things down and allow our economy to continue its recovery without messing things up!

 

The opinions voiced are for informational purposes only and are not intended to provide specific advice to any individual. To determine which investments are appropriate for you, consult myself prior to investing. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. The economic forecasts set forth in this commentary may not develop as predicted and there can be no guarantees that strategies promoted will be successful.

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