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Market Preview Week of 11/06/17 - Investor Sentiment

by Caldwell Trust

Market Preview - Week of 11/6/17 - Investor Sentiment

  • Jerome Powell nominated as next Federal Reserve Chairman
  • Tax reform legislation introduced
  • Strong Jobs Report
  • General Electric shares placed on hold

Thursday’s Wall Street Journal put it most succinctly regarding Jerome Powell being nominated by President Trump as the next Chairman of the Federal Reserve – “a move likely to combine continuity on interest rate policy with perhaps a lighter touch on financial regulation.” Expect the relatively accommodative stance of the Federal Reserve with respect to interest rates to continue. The consensus continues to project an increase in the Fed Funds rate in December with three more currently slated for next year.

The other big news coming out of Washington was proposed tax reform legislation. As anticipated the corporate tax rate will be reduced to 20% from the current 35% rate if the legislation is ultimately implemented which will have a meaningful impact on corporate earnings. The impact of the proposed individual tax reform is difficult to evaluate given all the moving pieces. We have seen some estimates that the corporate income tax rate reduction adds $10-$11 to S&P 500 earnings next year which are currently estimated in the $145 range by pundits.

The Friday jobs report beat consensus estimates rebounding from last month’s numbers. The previous report was impacted by the late summer slew of natural disasters. The unemployment rate now stands at 4.1%, the lowest rate since the beginning of the millennium. As has been the trend, signs of significant inflation continue to be absent as is meaningful wage growth.

Domestic equity markets continued to move higher last week with the S&P 500, Dow Jones Industrial Average, and the NASDAQ Composite up roughly 15%, 20%, and 25% respectively for the year. Bond yields moved lower for the week. S&P 500 Q3 earnings season is moving towards a close with over 80% of companies having reported results. Results for both earnings beats and revenue growth remain in the normal range. While disappointing results for property and casualty insurers (due to catastrophic loss write offs) have negatively impacted earnings growth, earnings growth will still be in the mid to high single digit growth range.

The investment committee placed General Electric on hold. The company reported poor earnings and is in the midst of a restructuring. Continuation of the dividend (4.5% yield) is in question. While Trust Officers’ are not compelled to sell holdings, no new positions should be established.

Next week will be relatively quiet on the economic front; Mario Draghi, ECB President, speaks at a banking conference in Frankfurt.

Next week earnings include:

Monday –  CVS Health, Michael Kors, Mylan, & Sysco

Tuesday – FMC

Wednesday – Fiotek Industries and Sealed Air

Thursday – Nvidia and Office Depot

Indices for the week and YTD are as follows:

S & P 500 up .26% for the week; YTD index return is 15.59%

NASDAQ Composite up .94% for the week; YTD index return is 25.66%

Dow Jones Industrial Average up .45% for the week; YTD index return is 19.11%

Benchmark 10-year Treasury bond yield stands at 2.33% - declining 10 basis points for the week


 J. Chris McGee, CFA, CAIA, Chief Investment Officer holds an MBA in finance and marketing from the J. L. Kellogg Graduate School of Management at Northwestern University and a BS in commerce from the University of Virginia. He is a member of the CFA Institute, CFA Tampa Bay and CAIA Association. He also served on the candidate curriculum committee of the CFA Institute and served as a grader for the CFA Examination for the CFA Institute in Charlottesville, Virginia. He has served on the board of directors of Selah Freedom, Sarasota, since 2014.

Chris McGee heads Caldwell’s investment committee, which draws on a team of experienced in-house professionals and carefully chosen outside analysts to make decisions for client portfolios.

A Chartered Financial Analyst (CFA) and Chartered Alternative Investment Analyst(CAIA), McGee had previously been senior investment adviser and senior vice president at PNC Wealth Management in Sarasota for nearly a decade. Prior to that he was portfolio manager for five years with U.S. Trust (formerly Bank of America) in Sarasota. Before relocating here, he had served as vice president, capital management, for Wachovia Bank in Winston-Salem, North Carolina.


About Caldwell Trust Company

Caldwell Trust Company is an independent trust company with offices in Venice and Sarasota, Florida. Established in 1993, the firm currently has nearly $1 billion dollars in assets under management for clients throughout the United States. The company offers a full range of fiduciary services to individuals including services as trustee, custodian, investment adviser, financial manager and personal representative. Additionally, Caldwell manages 401(k) and 403(b) qualified retirement plans for employers.

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