Weekly Investment Outlook: April 10, 2017

weekly update


The payroll report for the month of March 2017 came in at 98000 jobs, much weaker than expected (median forecast 180000). The weather and retail jobs losses were mostly blamed for the poor report, so yes there was lot of noise, but no way can we put a lipstick on this pig. Besides the payroll data was revised lower by 38000 for both January and February. The disappointing payroll report on last Friday did little to dampen the equity bulls. Although the private employment growth seems to have slowed from about 2% in the last 12 months, it has stabilized at 1.7% since last December.



Source: bls.gov, Morningstar.com


The fed minutes which came out last week for the March 2017 FOMC meeting indicated Fed’s plan to trim $4.5 trillion balance sheet. The markets may have cut the expectations for Fed rate hike mainly because of the idea that Fed may go slower once they start trimming the balance sheet. The base of the balance sheet was close to $900 billion when the Federal Reserve started the quantitative easing. Since then the balance sheet has grown to about $4.5 trillion and given that the economy has grown since 2009, the Fed may be looking at about $2 to 2.5 trillion in trimming over the next five years.




The first quarter earnings season kicks off this week, with all the big four banks reporting later this week. According to Thomson Reuters, the market consensus for Q1 S&P 500 earnings growth is 10% (y/y), and the earnings are expected to gain momentum towards the year end, as 13.4% earnings growth is expected in the last quarter of 2017. This, obviously will be revised (most likely lower) as we go through each quarter.

The European markets this week will continue to focus on ECB policy and the French presidential election with the first round vote now only 13 days away on April 23.



Source: TC2000


The S&P 500 is facing resistance at the downtrend channel line, 2365-2370 and it is finding the support at the 50 day moving average. Better than expected earnings or outlook, may help the S&P 500 break above its resistance level. I have a little bullish bias on the equities here.


This information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Chintan Shukla, CFA and not necessarily those of Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. You cannot invest directly in any index and Past performance may not be indicative of future results. Investing involves risk and investors may incur a profit or a loss. 1: From research paper Bubbles for Fama*, Harvard University &Endogenous regime switching in speculative markets by Rajiv Sethi. Goldfarb Financial is an Independent firm. Securities offered through Raymond James Financial Services, Inc, Member FINRA/SIPC. VIX is the Chicago Board Options Exchange (CBOE) Volatility Index, which shows the market’s expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. It is a widely used measure of market risk. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions.