Has anyone else noticed how volatile the first quarter has been the last 3 years ?<\/p>\n
In 2014, it was Russia driving tanks into Ukraine, the Venezuelan devaluation and profit-taking after the 32% increase in the SP in 2013.<\/p>\n
In 2015, it was falling crude oil, falling commodities, West Coast Port slowdown, strong dollar and even weather in February ’15.<\/p>\n
In 2016, the volatility is the result of Financial stock volatility, European bank worries, negative interest rates, etc.<\/p>\n
Not one of the last three Q1’s seems to be driven at all by the US economy and worries therein. Jobless claims remain strong.<\/p>\n
So what gives ? What is it with the first quarter every year ?<\/p>\n
I don’t know, but it is always something.<\/p>\n
What is happening with Financial sector earnings ?\u00a0<\/strong><\/em><\/p>\n Well, according to Thomson Reuters data, Financial sector earnings are now expected to be negative for Q1 and Q2 ’16, and with Financials as a sector being 20% of the SP 500 by market cap, to go from mid to high single-digit expected earnings growth to now negative earnings growth, well it is (another) drag on the SP 500.<\/p>\n Wouldn’t it be something if crude stabilizes, Energy sector estimates start to stabilize and then Financial’s take gas ? However the two are tied at the hip. Given JP Morgan’s Investor Day this week where reserves were increased for the Energy loan book and write-downs increased, just 5 weeks after JPM reports Q4 ’15 earnings, and guided to Energy losses, it looks like the Financial sector particularly the banking system is girding for more Energy losses in the loan books.<\/p>\n