{"id":6784,"date":"2017-03-26T15:34:23","date_gmt":"2017-03-26T15:34:23","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=6784"},"modified":"2017-03-26T15:34:23","modified_gmt":"2017-03-26T15:34:23","slug":"sp-500-weekly-earnings-update-8th-straight-weekly-increase-in-fwd-4-qtr-growth-rate","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=6784","title":{"rendered":"SP 500 Weekly Earnings Update: 8th Straight Weekly Increase in &#8220;Fwd 4-Qtr Growth Rate&#8221;"},"content":{"rendered":"<p>Ryan Detrick of LPL Financial (@ryandetrick post <a href=\"http:\/\/lpl-research.com\/hoc\/Charts\/Markets\/032217_MMM_Figure1.jpg\">here<\/a>), UKarlewitz of Fat Pitch fame (@ukarlewitz<a href=\"http:\/\/fat-pitch.blogspot.com\/2017\/03\/weekly-market-summary.html\"> here<\/a>), and Charlie Bilello over at Pension Partners (see<a href=\"https:\/\/pensionpartners.com\/are-you-losing-sleep-over-a-1-decline-in-stocks\/\"> here<\/a>) (mentioned in no particular order) all noted on Twitter this past week, that with the first 1% daily decline in the SP 500, the first in 109 days, that 3 and 6-month &#8220;forward&#8221; returns&#8221; after a 1% drop for the key benchmark still look pretty healthy, after similar, and stable, low volatility progressions.<\/p>\n<p>Looking through the charts this weekend and some technical analysis, the SP 500 looks to be at a critical juncture.<\/p>\n<p>However, the earnings data continues to look sanguine, and in fact bullish, although it&#8217;s a poor, short-term timing tool.<\/p>\n<p><em><strong>Thomson Reuters data (by the numbers): Source, 3\/24\/17 &#8220;This Week in Earnings&#8221;:<\/strong><\/em><\/p>\n<ul>\n<li><em><strong>Forward 4-quarter estimate:<\/strong><\/em> $130.91<\/li>\n<li><em><strong>P.E ratio:<\/strong><\/em> 17.9(x)<\/li>\n<li><em><strong>PEG ratio:<\/strong><\/em> 2(x)<\/li>\n<li><em><strong>SP 500 earnings yield:<\/strong><\/em> 5.58%, vs last week&#8217;s 5.51%, the first increase in the earnings yield since mid-January &#8217;17<\/li>\n<li><em><strong>Year-over-year growth rate of forward estimate:<\/strong><\/em> +8.96% vs last week&#8217;s +8.85% and the 8th straight week of consecutive increases in the forward growth rate.<\/li>\n<\/ul>\n<p>The steady increase in the y\/y growth rate of the forward estimate is consistent with the forward estimates for each of the individual quarters for Q1 &#8217;17 &#8211; Q4 &#8217;17. There is less negative revisions occurring in the expected forward growth rates for each quarter for 2017, which was written about several times in 2016, including this post <a href=\"https:\/\/fundamentalis.com\/?p=6517\">here<\/a>, but I dont think readers understand the implications of what it means for the SP 500.<\/p>\n<p>The natural trend of growth rates as we move towards each quarter and year, is that &#8220;expected growth&#8221; typically gets revised lower until shortly before the actual quarter gets reported and then the actual quarterly growth rates typically exceed the estimates growth rates, once we see actual earnings<\/p>\n<p>By noting the less onerous revisions, already for 2017, this should portend favorably for SP 500 earnings for 2017.<\/p>\n<p>And this is before tax reform, cash repatriation, and comprehensive reform is even in the numbers.<\/p>\n<p>On its own, without tax reform help, the SP 500 should grow earnings this year 10% &#8211; 12%. Energy is a big reason for this year&#8217;s increase, and one reason client&#8217;s remain overweight the sector, although I&#8217;ve been early and wrong so far on the Energy overweight.<\/p>\n<p>Jeff Miller, the great &#8220;Dash of Insight&#8221; and &#8220;Weighing the Week Ahead&#8221; blogger (and a long-time friend of this blog), noted in his <a href=\"http:\/\/dashofinsight.com\/weighing-the-week-ahead-what-does-the-health-care-decision-mean-for-stocks\/\">blog this weekend<\/a> Factset&#8217;s Energy article and my posture on 2016 and 2017 SP 500 earnings.<\/p>\n<p><em><strong>Analysis \/ conclusion: <\/strong><\/em>Readers should know by now at any given the time and for any reason the SP 500 is subject to a 5% &#8211; 7% correction &#8220;just because&#8221;. With Q1 &#8217;17 ending this coming Friday, March 31, 2017, the SP 500 is on track for a 5% quarter and &#8211; right now anyway &#8211;<a href=\"https:\/\/fundamentalis.com\/?p=6539\"> this blog&#8217;s guesstimate for a 20% year for the SP 500 made last December &#8217;16<\/a>, looks pretty good.<\/p>\n<p>However, I&#8217;ll be the first to tell readers take all predictions and opinions with a grain of salt. Much happens in the markets and within the world every day that can&#8217;t be predicted.<\/p>\n<p>Watching SP 500 earnings data, brings readers back to a longer-term fundamental reality, that helps deal with some of the daily noise.<\/p>\n<p>Client&#8217;s are still overweight Technology, Financials, and Energy. None of the companies followed or modeled fundamentally, report this week.<\/p>\n<p>Keep your eye on the 10-year Treasury yield: since mid-March &#8217;17 or the last FOMC meeting the 10-year Treasury rallied from 2.60% yield to 2.40%.<\/p>\n<p>The 10-year yield has tested the 2.30% level in both January and February &#8217;17, with the yield staying above both times. If there is a problem with the Trump agenda, or the Congressional pro-business package or credit worries, a 10-year Treasury trade through 2.29% &#8211; 2.30%, will confirm SP 500 weakness.<\/p>\n<p>Thanks for reading.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Ryan Detrick of LPL Financial (@ryandetrick post here), UKarlewitz of Fat Pitch fame (@ukarlewitz here), and Charlie Bilello over at&hellip;<\/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":[92,98,155,91],"tags":[],"class_list":["post-6784","post","type-post","status-publish","format-standard","hentry","category-fwd-4-qtr-growth-rate-sp-500","category-sector-earnings-growth-estimates","category-treasuries","category-weekly-earnings-update"],"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\/6784","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=6784"}],"version-history":[{"count":10,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/6784\/revisions"}],"predecessor-version":[{"id":6798,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/6784\/revisions\/6798"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6784"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6784"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6784"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}