Since probably late November, ’16, there has been a plethora of pundits appearing in the mainstream financial media, telling investors to wait for a pullback before buying the Financial sector. However, like the “treading of water” the SP 500 did from mid-December to mid-January, the Financial sector hasn’t pulled back much on down days or down weeks, and in fact a number of Financial’s have gone on to all-time highs in 2017 such as Berkshire Hathaway (BRKA\/BRKB), Goldman Sachs (GS), JP Morgan (JPM), just to name a few. (Long all three names, with the two of the larger Financial weights behind Schwab, being Goldman and JP Morgan.)<\/p>\n
Should readers be cautious ? Is there a pullback in the offing ?<\/p>\n
There could be – at any time and for any number of reasons, any sector can correct 5% – 10% just in the normal course of a market evolving.<\/p>\n
Here are the numbers for the Financial sector:<\/p>\n
Q4 ’17:<\/strong><\/em> +18.7%, vs. +13.5% as of Jan 1, ’17;<\/p>\n Q3 ’17:<\/strong><\/em> +7.9%, vs. +7.3%, as of Jan 1, ’17;<\/p>\n Q2 ’17:<\/strong><\/em> +10.6%, vs. +10.1% as of Jan 1 ’17;<\/p>\n Q1 ’17:<\/strong><\/em> +15.5%, vs. +16.0% as of Jan 1 ’17;<\/p>\n Q4 ’16:<\/strong><\/em> +11.6% vs. +15.4% as of Jan 1 ’17;<\/p>\n Source: Thomson Reuters I\/B\/E\/S TWIE dated 2\/24\/17<\/p>\n Financial sector revenue growth in Q4 ’16 is currently 3.9%, which is slightly better than the average revenue growth since the mid-2000’s.<\/p>\n The key tell for readers is that forward quarters continue to see higher revisions, during a period where the course of normal revisions is negative. For example, note Q1 ’17, which earnings start to get reported beginning April 10. 2017.<\/p>\n While the expected Financial sector earnings growth of +15.5% is slightly lower than January 1’s expected rate of +16%, the SP 500 (total benchmark) has dropped to +10.5% as of this weekend, for q1 ’17, versus a +13.8% growth rate expected on January 1 ’17.<\/p>\n The point being that relatively, (which is what you want from a sector rotation strategy), the Financial sector’s expected earnings growth is hanging in much better than the SP 500 overall.<\/p>\n And the same goes for the rest of the forward quarter’s after Q1 ’17 as well.<\/p>\n As if this weekend and today, the forward estimates for Financial’s continue to look good.<\/p>\n Thanks for reading.<\/p>\n <\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" Since probably late November, ’16, there has been a plethora of pundits appearing in the mainstream financial media, telling investors…<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[89,84,53,60,188,27,36,98],"tags":[],"class_list":["post-6729","post","type-post","status-publish","format-standard","hentry","category-earnings-estimate-revisions","category-financial-sector","category-financials","category-gs","category-inc-brk-b","category-jpm","category-schw","category-sector-earnings-growth-estimates"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/6729","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6729"}],"version-history":[{"count":5,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/6729\/revisions"}],"predecessor-version":[{"id":6734,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/6729\/revisions\/6734"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6729"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6729"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6729"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}