Stocks extended their recent gains, finishing higher for the fifth straight week. Recent signs of progress on trade negotiations, along with better-than-expected corporate earnings, has helped recession fears to subside over the past month, boosting investor sentiment. With the global growth backdrop starting to stabilize, Treasury yields climbed to their highest level in three months. Uncertainties, especially on the trade front, remain, but on a positive note, earnings are expected to bottom out this year and reaccelerate next year to a mid-single-digit pace. Given current reasonable valuations, we think this sets the stage for moderate returns as we advance in this bull market.
Bottom Lines Help Stocks to a New Top
There are plenty of issues garnering the market's attention of late, including ongoing trade issues, political drama, Fed rate maneuvers, and geopolitical uncertainties. But one of the more fundamental drivers has also been in focus most recently -- corporate earnings results – which are contributing to the market's ascent to new highs.
With roughly 90% of S&P 500 companies having reported results, the third-quarter earnings season is near its end. Corporate profits are on track to register a small decline (-1% as of 11/8/19) compared with a year ago. However, results have been better than expected (or feared), joining forces with the latest signs of progress on trade negotiations to help push the stock market to a fresh record last week1. Here are three takeaways from the recent corporate earnings results:
Sources: 1. Bloomberg, 2. FactSet, 3. Morningstar Direct, Edward Jones calculations
Craig Fehr, CFA
Angelo Kourkafas, CFA
Investment Strategy Analyst
|Dow Jones Industrial Average||27,684||1.2%||18.7%|
|S&P 500 Index||3,093||0.9%||23.4%|
|10-yr Treasury Yield||1.94%||0.2%||-0.8%|
Source: FacSet, 11/08/19. Bonds represented by the iShares Core U.S. Aggregate Bond ETF. Past performance does not guarantee future results.
The Week Ahead
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