Earnings Should Make New Highs
We are entering the third quarter earnings season. Markets keep grinding higher. The CBOE Volatility Index is dragging at all time lows. Geopolitical issues keep simmering but the markets seem somewhat desensitized with little reaction even on Friday when Trump was making remarks concerning Iran.
Banks started reporting this week and next week the earnings reports pick up with a slew of S&P 500 components reporting. One of the more important data metrics tracked each week is the “upward versus downward” estimate of earnings revisions within the S&P 500. The quarter has seen upward revisions outpace downward revisions, which is setting up the markets for more new highs. The anticipated Q3 ’17 S&P 500 earnings is currently 4.4%, we expect the final number to be higher, perhaps as high as 8%. All this good news creates caution as well because we feel that the incredible run in the markets could eventually run into a nasty correction. As we stated in the last blog around every bend on Highway 101 is a better view. However, on occasion there is an earthquake that wipes the road out and the view is not good!