August 1, 2022

Weekly Market Update

By Michael McKeown, CFA, CPA - Chief Investment Officer

Weekly Market Update

Chart of the Week

Plenty of negativity from investors may be priced into stocks. The markets do not move on good versus bad news overall; movement is relative to expectations. News that is bad, but slightly better than expected can be received well. If sentiment gets too negative among investors, just glimmers of hope can turn the tide.

Over the past month, the number of companies with lower earnings estimates was seen only twice in the last 15 years. This happened in late 2008 and in 2020, both periods that included deep drawdown in equity prices.  The bar has been lowered quite a bit. Today, 269 companies have seen analysts decrease estimates for earnings over the next 12 months. With earnings this past quarter surprising on the upside, perhaps the time for better news is here. So far, 75% of the market value of the S&P 500 Index reported results this quarter. According to Goldman Sachs, earnings increased by 9% on a year-over-year basis with revenue growth across all sectors.

Net Change in 12-Month EPS Estimates

What We’re Reading

I Beg to Differ – Oaktree
How Inflation Is Impacting Commercial Real Estate – Green Street
Road Ahead: The 60/40 Portfolio, Bear Markets, and Recessions – Man Institute
What is the Federal Reserve and How Does it Work? – Morningstar
Senators Press Fidelity on Bitcoin Exposure – Plan Sponsor

Podcast of the Week

Five Big Issues Top Washington’s To-Do List – Washington Wise, Schwab

The Past Week

The Federal Reserve Open Market Committee increased interest rates by 0.75%, as expected. The Fed chairman, Jerome Powell, indicated that the pace of interest rate hikes would slow in the future. This news catalyzed equity markets higher and bond yields lower.  The estimate for second quarter GDP came in below expectations and was the second straight quarter of negative growth. Of course, this GDP report will be revised in the months and quarters ahead as more accurate data become available. Earnings came in above expectations for large cap technology companies reporting last week.

The Past Week

The Week Ahead

On deck this week are reports from Standard & Poor’s and the Institute of Supply Management. Jobless claims trended higher the last few weeks, so July payrolls along with the revision to June will be a key data point. This week has another heavy list of earnings reports including from chip maker Advanced Micro Devices.

The Week Ahead

Talk to you next week.

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