When we last spoke, the major U.S. indices were roaring along and the 49ers were in the Super Bowl. Sadly, my favorite football team lost another heartbreaker (was that painful for me to write? Maybe.)
On the brightside, February was a solid month across the board for the major stock indices with tech stocks again leading the way.
Earnings have continued on their positive run that began January 19th. With ~80% of the S&P 500 reporting thus far, we have:
- 75% reporting earning above estimates (slightly below the 5 year average of 77%, but above the 10 year average of 73%)
- 7 of the 11 sectors are reporting year over year earnings growth
While I'd like to see these numbers a bit higher, I think the trajectory of overall earnings growth is very positive news and the market has seemed to agree.
The bond market did not fare as well, as interest rates increased (remember the inverse relationship between bond prices and bond yields I discussed in this widely read newsletter.) A few months ago, it appeared that the Fed would lower rates as soon as May. That may be on hold (for now) since January's inflation numbers were slightly higher than expected with the Consumer Price Index (CPI) rising by 3.1% year over year vs. an anticipated 2.9%.
The next inflation report comes out on March 12th which should give us a better idea as to the health of the economy and what the Fed may (or may not) do.
As the calendar turns to my favorite month of March (any other March birthdays out there?) I am eager to see how the last 20% of earning reports go, what the inflation data looks like and if the San Francisco Giants will become relevant again. (You didn't think I only cared about finance and football did you?)
Ultimately, I am still fairly optimistic that our economy is headed in the right direction but as always stay tuned!
Take good care and please do reach out with any questions or comments.
Until next time...
Steve