E What Investors Are Focused On

According to an article in Crossing Wall Street, analysts on Wall Street currently expect the S&P 500 to have earnings of 35.64. That’s the index-adjusted number, and it’s a very good one, with every point in the index is worth about $8.5 billion. If that estimate is right, then it would represent a 23.7% increase over last year’s Q1. That’s very strong growth, and the final number will probably be even better. Typically, about 60% to 75% of earnings reports exceed expectations.

As discussed in the Almanac Trader since 2006, April has been up twelve years in a row with an average gain of 2.5% to reclaim its position as the best DJIA month since 1950. April is third best for S&P (since 1950) and fourth best for Nasdaq (since 1971). The first half of April used to outperform the second half but since 1994 that has no longer been the case. Traders and investors are clearly focused on first quarter earnings during April.

Exceptional Q1 earnings and positive surprises tend to be anticipated with stocks and the market moving up in advance of the announcements and consolidating or correcting afterwards. April’s trading pattern is the bulk of gains typically materialize in the second half of the month. Compared to April’s average performance over the last 21-years, DJIA is the only index in line with historical performance while S&P 500, Nasdaq, Russell 1000 and Russell 2000 are all lagging. Looking ahead, sideways and choppy trading are likely from now until around mid-month. At which point, earnings season is generally underway and results and guidance typically propel stocks higher into month’s end…” In the updated graph below, gold is the top performer so far this year. This pretty much confirms investors’ nervousness because gold is considered a “safe-haven” investment and the riskier asset classes have now done as well. 

 

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