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Aug 15 2016

This Week’s Market Moving Events

As second quarter earnings season draws to an end, many market prognosticators are a bit perplexed. While earnings as a whole beat consensus estimates, they did so to a lesser degree than in previous quarters. Moreover, earning fell year-over-year by roughly 5% – in other words, corporations made less money for shareholders in Q2 2016 than they did in Q2 2015, yet major indexes hit new all-time highs this past week. The disconnect between fundamentals, i.e. earnings and earnings growth, and share prices should not be taken as a sign that fundamentals just don’t matter; they just don’t matter right now. Market participants are betting that low interest rates will be in place for many more years, and that simultaneously growth will reappear, providing fuel for the current rally.

 

Looking Ahead:

There isn’t much data for investors to digest this week, meaning that a slow drift higher is the most likely scenario for now. And while major indexes hit new all-time highs last week, not all stocks are over-valued, and smart investors continue to find opportunities.

 

This Week’s Market Moving Events:

Monday: Empire State Manufacturing Index, Housing Market Index

Tuesday: Consumer Prices, Housing Starts, Redbook Report, Industrial Production

Wednesday: FOMC Minutes are released, Atlanta Fed Business Inflation Expectations

Thursday: Philly Fed Business Outlook, Consumer Confidence Index

Next week – Jackson Hole