Everyday, Everyday I Have the Blues
By John Stoltzfus,
Chief Investment Strategist
Trend Analysis
Market Strategy Radar Screen Weekly - November 17, 2014
In this article:
- Market Analysis
- VIX
- Asset Allocation
What a Difference a Month Makes
A healthy stock rebound empowered by solid 3Q earnings, economic data including retail sales and consumer confidence
The S&P 500, the S&P 400 and the Russell 2000 have rebounded rising 9.52%, 10.32% and 9.55% respectively since the market low on October 15th through last Friday.
Equities stateside have been lifted higher by stronger economic data and a positive 3Q earnings season that’s posted revenue and earnings growth of 3.96% and 9.04% respectively (with 463 of 500 companies having thus far reported).
Lower gas prices, a strong dollar, higher employment and improved consumer sentiment are underpinning sentiment on Main Street USA.
Among the economic data points we see reflecting the sustainability of the current economic expansion as recently as last week:
- The November preliminary reading of the Michigan index of consumer sentiment showed the index at a seven year high of 89.4 (up from 86.9 last month) and at pre-crisis levels. The index had averaged 89 in the five years preceding December 2007 when the US entered the recession that led into the Great Recession.
- Retail sales rebounded in October with purchases rising 0.3% in 11 of 13 tracked categories. Among the activities ringing the proverbial cash register were consumers
eating at restaurants and buying new clothes. A good part of the recent enthusiasm to shop likely came from cheaper gasoline at the pump (lowest prices since 2010). Last week’s retail sales report bodes well for the holiday season ahead as well as for Consumer Discretionary, our contrarian sector pick.
Other than gasoline prices:
- The rebound in stock market prices since mid-October,
along with increases in home prices and a better jobs
picture has boosted consumer confidence creating a wealth
effect and likely signaling that the improved economic
environment may still be in its early stages.
Source: Oppenheimer & Co., Inc. Investment Strategy
