April 11, 2016
Dear Client/Prospect:
Navigating the markets in early 2016 has been treacherous. Social media stock LinkedIn down 45% in one day; that’s enough to bring anyone to their knees. While the first six weeks of the year were very rocky, the next six performed admirably and made up for the free-fall. Election years are historically very good years for the markets. I think the uneasiness with who the candidates will be and in some cases, what they represent, has made many investors and corporations nervous. I believe as we get closer to the national conventions and the two candidates are finally clear, we will finally see some stability in the markets. Until then we are probably going to see continued volatility.
Earnings season kicks off today with Alcoa and then the major banks reporting throughout the week including Goldman Sachs, Wells Fargo, Bank of America and Morgan Stanley. This could be an indicator of what may be coming as far as corporate earnings for the quarter. Many analysts are predicting up to a 33% drop for most companies’ quarterly revenues but we will have to wait and see if this is accurate. I expect some misses but that number seems quite high. The economy seems to continue to be stable and job growth continues to trend upward. Non-farm payroll additions were 205,000 for March and February was revised upward from 242K to 245K. Job gains were strongest in retail, construction and healthcare. Unemployment has stayed steady at 4.9% and average hourly earnings were up 0.2%.
February single-family home completions were (March numbers are not out until April 20) 736,000. This was a solid number as it is 6.1% higher than January. Builders do continue to report problems regarding shortage of labor and lots.
The Fed Minutes didn’t seem to be as aggressive as earlier this year. It seems they are backing off slightly and taking a cautious approach to more rate increases. While this may be tough for some to swallow, it may be the best strategy until we see more favorable corporate earnings reports. The Dallas Federal Reserve chair did indicate that a June rate hike was possible if job growth continues to be strong and economic data is trending positive. Some certainty with the Presidential election candidates would be helpful too.
Sincerely,
J.B. L’Esperance, ChFC
The L’Esperance Group, LLC dba/ Barking Sands Capital is a Registered Investment Advisory firm in the states of Michigan and Minnesota. These comments are opinions only and don’t reflect any type of investment advice. If you have questions about your accounts or would like to open an account please give us a call at 248.687.1040 or 952.500.8854.