May Market Commentaries: BLOG
May 10, 2017 by Bob Drury
Good Afternoon,
The bull market is now officially over eight years old. The last time the S&P 500 went down by 20% or more was March 9, 2009 (more than 2,970 days long). This is the second longest running bull market in history (longest was over the early to mid-1950’s). Leading indicators point towards potential continued growth.
RBC Global Asset Management released a research note with an interesting insight. They found that when the Conference Board’s Leading Economic Indicators (LEI) index was rising month-to-month and was already above zero year-over-year, the stock market averaged an 11.8% gain in the following 12 months. The last time this happened was just before the U.S. presidential election – and the strong market rally then followed. From the RBC note: “Improvement in the LEI is meaningful because stocks have returned an annualized average of 11.8% in periods where the LEI is positive and rising as it is now, compared with just 0.3% when the LEI is positive but falling, which was the case prior to the start of the latest rally.” As of its latest reading, the LEI continued to strengthen from an above-zero condition. According to this measure, at least, it seems there are prospects for more gains. As always, past performance is no guarantee of future results.
- Steve Osterink at Advisory Alpha pointed to strong earnings helping to support the markets, “Investors pursued the trend of buying US stocks once companies began reporting first quarter profits. Of the largest 500 US companies that have already reported, over two-thirds grew profits in comparison to the same reporting period from last year. Companies that overlap the technology and consumer cyclical space had some of the best results. Those shares helped send some stock indexes up to new highs. Unfortunately, some defensive named stocks and big auto makers saw their sales and profits drop.”
- Louis Navellier also commented on the current highs of the markets, “In the first week of May, the Dow Industrials closed above 21,000 for the first time since March 3, while the S&P 500 closed near 2,400, a record high, and NASDAQ topped 6,100, also a record high. The biggest gains came after Friday’s monthly payroll report, in which the Labor Department announced that 211,000 jobs were created in April, significantly more than the consensus estimate of 188,000. The unemployment rate declined to 4.4%, down from 4.5% in March, so unemployment is now at the lowest level in almost a decade. Average hourly earnings rose by 0.1% or 7 cents per hour to $26.19 per hour, up 2.5% in the past 12 months, while average hours worked rose by 0.1 hour to 34.4 hours per week.
