For as many headlines as there have been recently, whether it be tariffs, or Brexit, or tweets, not much has changed in my opinion of the stock market. The market seems very range-bound, reinforcing my belief that the summer could be fairly flat for the stock market, generally speaking. Since we have broken a little bit above 2800 on the S&P 500, I think that means that the path of least resistance is marginally higher and that our downside support might be about 2650.
I am still bullish on the stock market now, although I am trying to add new money when the S&P 500 pulls back. Corporate earnings have been fantastic, and that often is what drives stock prices. According to Earnings Insight from FactSet the estimated earnings growth rate for the second quarter of 2018 would be the second highest growth rate since 2010. Consumer confidence is still high and initial jobless claims numbers are continuing their remarkable tear. However, the Federal Reserve’s position on raising interest rates could act as a headwind for stocks, as could the recently strong US Dollar. If oil prices stay high for a while, that could slow down consumption of other goods and services, which could hamper economic growth.
Energy is still among our favorite sectors, and I like Technology, as well. We are not recommending new investments into interest-rate sensitive sectors like Real Estate, Utilities, Telecommunications, and Consumer Staples. We believe those groups often are perceived by investors as being stable and having high dividends. When interest rates go up, some investors will take money from these stocks and move it to bonds, which (in theory) offer lower risk and newly-competitive rates.
So, I think that means that you can continue to enjoy your summer, and not worry too much about stocks and the economy. Or Brexit. Or tariffs. Or tweets. Aside from vacations, summer is also a great time to schedule some time to sit down with us for a review of your situation. We have some amazing tools at our disposal, both in terms of technology and professionals, that might help you get a better grasp on your situation, financial or otherwise. We are really excited about our partnership with PinnacleCare, which can help coordinate healthcare needs for our clients to help find medical professionals and customize a treatment plan. If you’d like to learn more about this, please give us a call.
As always, these recommendations are mine, and may or may not be the same as those of Raymond James. This is not a solicitation to invest, although we do invite you to review your portfolio with us to see if any changes should be made.
Past performance may not be indicative of future results. There is no assurance any of the trends mentioned will continue or forecasts will occur. Investing involves risk including the possible loss of capital. Asset allocation and diversification do not guarantee a profit nor protect against loss.
Any opinions are those of Scott Mitchell and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. Keep in mind that individuals cannot invest directly in any index, and index performance does not include the transaction costs or other fees, which will affect actual investment performance. Individual investments are companies engaged in business related to a specific sector. They are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification.
The S&P 500 is an unmanaged index of 500 widely help stocks that’s generally considered representative of the U.S. stock market. Investing in the energy sector involves special risks, including the potential adverse effects of state and federal regulation and, may not be suitable for all investors.