They tell us that fall is here…and with it comes crisp air, football, The Ryder Cup (a great victory for the U.S.A.), an increasingly intense election season, apple pie, pumpkin spice, and for many students, fall break. The market has been in a "trading range" for the past month, and we could be poised for our own fall break…up and out of this range.
Yearly Market Cycle
As you can see in the graph below, fall is typically a strong season for the stock market...especially in election years.1Therefore, we continue to believe any pullbacks to be buying opportunities.
Low Interest Rates
The Fed’s decision not to raise rates in their September meeting brought a positive jump in the S&P 500. While the decision was not a surprise, it removed any remaining uncertainty until at least December, and leaves us in a bullish low interest rate environment.2
Improving Earnings
The S&P 500 has now had seven straight quarters of declining earnings, but the market has “held its own” in spite of it. However, the red lines in the graph below show projected 2017 earnings estimates. If earnings reports come in anywhere close to these estimates, the so-called “earnings recession” will be over. This would also support our continued belief that we are in a secular bull market that has six to seven years left.2
In view of the historic yearly election cycle, low interest rates, and improving earnings estimates, we hope to see a continued long-term bull market. While students around the country are enjoying their fall break, we hope to be enjoying a break-out in the market. Thank you for the privilege of working with you, and if there is anything additional we can do to serve you, please let us know.
MCT: cat
1Investment Strategy, Jeff Saut, September 20, 2016
2Gleanings, Jeff Saut, September 26, 2016
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