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In this monthly U.S. market update, we have a critical question to answer—
How can the S&P500 have a 17.7 forward 12-month Price to Earnings (P/E) ratio, when the historic average is 14.3, and when the latest GDPNow forecast for the first quarter U.S. economy is a paltry +1.9% q/q?
First of all, it is a good question. There should be some connection.
We DO see, however, a much stronger earnings per share (EPS) number coming out for the accumulated S&P500 index companies in the latest fourth quarter reports. That was +4.9%. The fourth quarter of 2016 will mark the first time the index has seen year-over-year growth in earnings for two consecutive quarters since Q4 2014 and Q1 2015. That was 7 quarters ago.
The end of the earnings recession is one big reason behind the recent S&P500 rise. I expect this is the biggest reason.
The second reason is likely the animal spirits and native optimism that sprung up from the Republican constituency on Wall Street. Much of the recent run up in stocks is blind optimism. In that sense, we need to be very careful.
Finally, there are deeperlending growth rates (averaging 6 to 7 percent) in a spectrum of financial markets to support bulls. We have seen this throughout this cycle. As long as these multiple pipes of liquidity flow swiftly inside the U.S. economy --at growth rates centered at 6 to 7 percent-- risk is “on”. Liquidity is just not sourced from U.S. “QE” anymore.
Zacks Sector/Industry/Company Telescope
The March sleeper story appearing, once again, via the Zacks sector and industry ranks is the internationally exposed areas. Info Tech and Materials are more globally exposed to non-U.S. final demand. They get the strongest bid. It’s NOT a Trump trade folks!
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>
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Running Before You Walk: Zacks Strategy
In this monthly U.S. market update, we have a critical question to answer—
How can the S&P500 have a 17.7 forward 12-month Price to Earnings (P/E) ratio, when the historic average is 14.3, and when the latest GDPNow forecast for the first quarter U.S. economy is a paltry +1.9% q/q?
First of all, it is a good question. There should be some connection.
We DO see, however, a much stronger earnings per share (EPS) number coming out for the accumulated S&P500 index companies in the latest fourth quarter reports. That was +4.9%. The fourth quarter of 2016 will mark the first time the index has seen year-over-year growth in earnings for two consecutive quarters since Q4 2014 and Q1 2015. That was 7 quarters ago.
The end of the earnings recession is one big reason behind the recent S&P500 rise. I expect this is the biggest reason.
The second reason is likely the animal spirits and native optimism that sprung up from the Republican constituency on Wall Street. Much of the recent run up in stocks is blind optimism. In that sense, we need to be very careful.
Finally, there are deeperlending growth rates (averaging 6 to 7 percent) in a spectrum of financial markets to support bulls. We have seen this throughout this cycle. As long as these multiple pipes of liquidity flow swiftly inside the U.S. economy --at growth rates centered at 6 to 7 percent-- risk is “on”. Liquidity is just not sourced from U.S. “QE” anymore.
Zacks Sector/Industry/Company Telescope
The March sleeper story appearing, once again, via the Zacks sector and industry ranks is the internationally exposed areas. Info Tech and Materials are more globally exposed to non-U.S. final demand. They get the strongest bid. It’s NOT a Trump trade folks!
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging
phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>