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Corporate earnings, based on S&P 500 Index operating earnings, have rebounded strongly since the second quarter of 2016. Second quarter earnings are estimated to have increased by 18.4% from a year earlier. Continued strong gains in earnings are forecast for the second half of this year with full year 2017 earnings expected to be 19.7% higher than 2016. Dividends also continue to rise strongly for the S&P 500 Index. Strong growth in earnings and dividends continue to be positive for stock prices. Continued growth will be needed to propel stock prices higher if yields on longer maturity Treasuries rise.
Special Reports provide a review of business, economic or market topics covering longer monthly or quarterly periods of timeClick for EARNINGS REPORT
Tensions between the U.S. and North Korea dominated financial markets over the past week. Moves in markets were what would have been expected. Stocks and the U.S. dollar fell, and yield spreads on corporate bonds widened. Low risk assets rose, notably gold and U.S. Treasuries. While not insignificant, changes clearly did not reflect any panic. On the U.S. economy, inflation rates stayed low in July. The job market remained tight, as job openings continue to rise sharply. Productivity has improved some, but is still below average. Weekly Reports provide a review of financial markets and recently released reports on the U.S. economy.
Topics of current interest and importance are also discussed.Click for INVESTMENT REPORT
Weekly Reports provide updates on financial markets and the U.S. economy, as well as discussions of current timely topics. This week's Report discusses why stocks are not likely to either rise or fall very much. On the economy, employment posted a solid gain in July, but rates of change are slowing. The labor market has increasingly been tightening with more workers needed to fill jobs. Recent slower growth in real personal incomes and lower personal savings are likely to moderate growth in consumer spending.Click for INVESTMENT REPORT
The Investment Strategy report is distributed monthly at the end of the month. The Report provides a recommended investment strategy for long-term investors with balanced portfolios. Assessments are provided for major classes of financial assets, supported by specific measures and metrics. If you manage your own portfolio, or clients' portfolios, or are interested in our assessment, this Report merits your attention.Click for INVESTMENT STRATEGY REPORT
With earnings growing strongly and dividends continuing to rise, the environment for stocks remains positive. But this is also reflected in high valuation levels on stocks. Expected real long-term rates of return are low for financial assets compared to historical norms, but on a relative basis, stocks are remain more attractive. The Federal Reserve is expected to start reducing its holdings of Treasuries and mortgage backed securities in late September. The result will likely be slightly higher yields on Treasury bonds. The Fed probably will not raise its target for the federal funds rate until mid December.
On the economy, real GDP grew at a 2.6% annual rate in the second quarter. New orders for durable goods continue to strengthen. New home sales remain strong, while sales of existing homes are increasing only modestly, due to declining existing homes for sale. Home prices continue to rise, but recently at a slower pace. Weekly Reports provide a review of financial markets and recently released reports on the U.S. economy. Topics of current interest and importance are also discussed.Click for INVESTMENT REPORT
Stock prices continue to rise, and some investors and members of the financial media are perplexed by this. We think they are not focusing enough on solid growth in earnings and dividends and are using an incomplete measure to value stocks. Yield spreads on corporate bonds continue to narrow due to strong growth in corporate earnings and Federal Reserve policies that are expected to remain very accommodative due to low inflation. On the U.S. economy, it looks as if real GDP grew at a 2.5% rate in the second quarter. Labor markets continue to tighten. And single-unit housing starts and permits continue to grow.
Weekly Reports provide a review of financial markets and recently released reports on the U.S. economy. Topics of current interest and importance are also discussed.