A recent report revealed that the S&P 500 Index has closed at 42 news highs since July 11, 2016. That’s the day the S&P 500 hit its first all-time closing high in almost 14 months.
A quick review of data from the St. Louis Federal Reserve reveals the index of 500 large companies added five additional closing highs as July came to a close. Low interest rates and a Federal Reserve that is reluctant to aggressively raise interest rates have been a support for the market.
But, we believe the most important long-term driver of stocks remains corporate profits. Note that we said long-term driver. We will experience bumps along the way. For example, we have had four declines in the S&P 500 Index that totaled less than 20% since the bull market began in 2009.
However, the economy did not sink back into a recession, and corporate profit growth continued in a general upward trend, preventing a more serious decline.
As of the end of July, Q2 S&P 500 earnings are forecast to rise a strong 10.8% versus a year ago. While that’s down from a stellar 15.3% in Q1, nevertheless it’s the second double-digit increase in as many quarters. In addition, we’ve been witnessing an uptick in revenue growth, which has been aided by an acceleration in global growth.
Put another way, the fundamentals have been dominating the investment landscape.
Table 1: Key Index Returns
Source: Wall Street Journal, MSCI.com, MarketWatch, Morningstar
MTD returns: June 30, 2017 – July 31, 2017
YTD returns: Dec. 30, 2016 – July 31, 2017
*Annualized, **in U.S. dollars
Other articles filed under Market Commentary
The Morgan Report Q1 2023 Review: Trying To Be Super Awesome Is Not Sustainable
April 12, 2023 - When investing, it would be awesome to be super awesome all the time. Unfortunately, unlike the fictional world of Lake Wobegon or The Incredibles, reality is not very accommodating to over confident fantasies of perpetual awesomeness. As a father of...
The Morgan Report Q4 2022 Review: The Year of Living Dangerously
January 11, 2023 - Danger can be defined as “something or someone that may harm you.” My role working with families as a financial advisor is to help them try to avoid dangers involved in our financial world which I believe is interestingly influenced...
The Morgan Report Q3 2022 Review: The Best Is Yet To Come
October 17, 2022 - Recently the International Monetary Fund’s (IMF) Chief Economist Pierre-Olivier Gourinchas, as a supplement to the IMF’s World Economic Outlook Report October 2022 stated in his blog that “Overall, this year’s shocks will re-open economic wounds that were only partially healed...
The Morgan Report Q2 2022 Review: Chaos – The True Norm
July 26, 2022 - Once upon a time, everything was peaceful and all beings lived in harmony. Well, I don’t know when that moment occurred or if it ever will but it sure feels like recently, random acts that are detrimental to our quality...
The Morgan Report Q1 2022 Review: Stagflation – A Perspective
April 18, 2022 - Quite often, people and investment managers select what they think are superior investments via seemingly well thought out analysis of the particular companies of interest and the macroeconomic conditions that affect them. “Obvious” picks seem to be readily apparent. The...
- The Morgan Report Q4 2021 Review: The Stewards Mindset
- The Morgan Report Q2 2022 Review: Chaos – The True Norm