With about 92% of the S&P 500 companies reporting actual results, the Q3 2019 earnings are tracking for about a 2.3% decline in earnings year over year. According to Factset, it will mark the first time the index has reported three straight quarters of year-over-year earnings declines since Q4 2015 through Q2 2016. The trade ‘tariff’ continued to be a matter of concern on the corporate earnings call for the S&P 500 companies, albeit a little less than the second quarter of 2019 but more than the first quarter of 2019.
The equity markets have been struggling to go through the 3000 level, after hitting highs in July earlier this year. Since then, the inverted yield curve, concerns about global economic slowdown, lack of progress the on US-China trade talks and lackluster corporate profits continued to act as major headwinds to the stock market. But things started looking up after the Federal Reserve stepped in, cutting the benchmark interest rates three times in the last four months. Apparently, the significant progress made on the trade talks with China helped the markets shake off some of the negative sentiments about the overblown recessionary fears. The S&P 500 has advanced 100 points in matter of few weeks to reach the 3100 level. The yield curve has steepened again, which signals the risk-on scenario for the equity markets and risk assets. In fact, the international equity markets have been also gaining momentum as the equity markets in many countries around the world have broken out to new 52-week highs. The MSCI All-Cap World Ex-U.S. Index has returned 9.1% since August 19th, outpacing the S&P 500 and Russell 3000 Index by about 3 percentage points over that period, and is on the verge of a breakout to new record highs, its first new high in nearly two years.
In the week ahead, investors will get a look at housing data, Federal Reserve policy meeting minutes, the Conference Board's Leading Economic Index (LEI), consumer confidence, and the Markit Manufacturing and Services Purchasing Managers' Index (PMI) surveys.
Stock investing involves risk including loss of principal.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.
The MSCI world index, which is part of The Modern Index Strategy, is a broad global equity index that represents large and mid-cap equity performance across 23 developed markets countries. It covers approximately 85% of the free float-adjusted market capitalization in each country and MSCI world index does not offer exposure to emerging markets.
The Russell 3000 Growth Index is an unmanaged index comprised of those Russell 3000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 3000 Value Index measures the performance of those Russell 3000 companies with lower price-to-book ratios and lower forecasted growth values.