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  • Scott Poore, AIF, AWMA, APMA

Market Breadth Continues To Improve

Markets moved higher last week in spite of the Fed raising rates after June's pause.

Overall, 51% of S&P 500 companies have reported 2nd quarter earnings and things are looking better than at the beginning of earnings season. So far, 80% have reported earnings above estimates (above the 5-year average), while only 64% have reported revenues above estimates (below the 5-year average). The Fed raised interest rates by 25 basis points last week, in a move that was highly anticipated by the market. The market is expecting that to be the last rate hike in the current cycle as futures point to an 80% probability of no rate hike in September. Even the Fed is no longer calling for a recession this year and their most recent measure of expected 3rd quarter GDP is +3.5%.


Consumer Spending and Consumer Sentiment were improved last week as spending in June was +0.5% after a disappointing May and sentiment hit the highest mark in 18 months.

The Fed’s favorite inflation barometer, PCE Price Index, continued to move lower year-over-year and 2nd quarter GDP came in at +2.4% (higher than expected and greater than +2.0% for Q1). Market breadth continues to improve which could continue to aid the rally. The number of S&P 500 companies that traded above their respective 50-day moving averages nearly hit 90% last week. When we reach that kind of market breadth, it typically signals a rally, with 12-month returns following such a mark in breadth being positive 96% of the time.

 

Disclosures


The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.


Forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.


Any market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.


Past Performance does not guarantee future results.

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