Exclusive Content

    If you are a client, sign in below to access exclusive content.

     

    We just finished the busiest week of 1st quarter earnings season, and although many companies shared positive results, stock indexes experienced modest declines.1 The S&P 500 lost 0.01%, the Dow dropped 0.62%, and the NASDAQ gave back 0.37%.2 International stocks in the MSCI EAFE decreased by 0.39%.3

    Last week provided a variety of information for investors to take in. On Friday, we received the initial reading of 1st-quarter Gross Domestic Product (GDP). The data came in more positive than analysts expected, with the economy experiencing 2.3% growth.4 The latest employment readings also showed costs for benefits and pay rising at the fastest pace in a decade.5 On the geopolitical front, the leaders of North and South Korea met for historic talks that could result in denuclearizing the Korean peninsula.6

    As we continue to watch these developments, we want to explore what’s behind our current corporate earnings season.

    A Deeper Analysis of Corporate Earnings

    So far, this earnings season is the best on record.7 Of the S&P 500 companies with published data, 79.4% of them beat expectations.8 The outperformance is significant, too. On average, companies are 7.95% higher than projected.9

    Despite these positive results, stock prices did not rise in reaction. Companies that beat expectations have only experienced an average of a 0.3% equity increase in the first day after their report.10 The disconnect between high earnings and low stock increases may be surprising. But when you look closer, lingering questions about corporate health are weighing on many investors’ minds:

    • Will higher costs— wages and materials—decrease their profits moving forward?
    • Could increasing treasury yields raise the cost of their debt?
    • Will they continue to benefit from the new U.S. tax law, or is this earnings season an anomaly?11

    No one can say for sure what is on the horizon for corporate performance. On one hand, concerns about growing costs and inflation could erode investor confidence and hamper the markets’ ability to regain previous highs.12 On the other, consumer sentiment remains high—and experts predict that each year until at least 2020, S&P 500 companies will have double-digit growth.13

    Looking ahead, we will monitor many different details to gain more insight into what the future may hold, including bond yields, wage costs, and inflation. For now, please contact us anytime if you have questions about current market conditions or your plans for the future.

    Ken is on WHUD, Sunday at 6am,
    presenting a GPS for your finances.

    Here is an archive if you missed him:

     

    Sources

    The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2014 Emerald Connect, LLC
    © Mahoney Asset Management

    INVESTING RISK DISCLOSURE
    Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money. Before investing, consider the funds’ investment objectives, risks, charges, and expenses. Contact Mahoney Asset Management for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

    IMPORTANT CONSUMER INFORMATION
    This web site has been prepared solely for informational purposes. It is not an offer to buy or sell any security; nor is it a solicitation of an offer to buy or sell any security.This site and the opinions and information therein are based on sources which we believe to be dependable, but we can not guarantee the accuracy of such information.

    Representatives of a broker-dealer or investment adviser may only conduct business in a state if the representatives and the broker-dealer or investment adviser they represent: (a) satisfy the qualification requirements of, and are approved to do business by, the state; or (b) are excluded or exempted from the state’s licenser requirements.

    An investor may obtain information concerning a broker-dealer, an investment advisor, or a representative of a broker-dealer or an investment advisor, including their licenser status and disciplinary history, by contacting the investor’s state securities law administrator.

    SECURITIES: ARE NOT FDIC-INSURED/ARE NOT BANK-GUARANTEED/MAY LOSE VALUE
    This information is intended for use only by residents of CA, CT, DC, FL,, MA, MD, MN, NC, NJ, NY, OH, PA, and VA. Securities-related services may not be provided to individuals residing in any state not listed above.

    The financial calculator results shown represent analysis and estimates based on the assumptions you have provided, but they do not reflect all relevant elements of your personal situation. The actual effects of your financial decisions may vary significantly from these estimates–so these estimates should not be regarded as predictions, advice, or recommendations. Mahoney Asset Managment does not provide legal or tax advice. Be sure to consult with your own tax and legal advisors before taking any action that would have tax consequences.

    Securities offered through
    Newbridge Securities Corporation,
    member FINRA / SIPC

    Investment Advisory Services offered through
    Newbridge Financial Services Group Inc.,
    an SEC Registered Investment Adviser.

    Office of Supervisory Jurisdiction
    5200 Town Center Circle, Tower One, Suite 306
    Boca Raton, FL 33486

    Toll-Free: 877-447-9625
    Phone: 954-334-3450
    Fax: 954-489-2390