Market Commentaries

  • Q3 Earnings Season is Underway as Volatility Continues


    Market Overview


    Sources: Sources for data in tables: Equity Market and Fixed Income returns are from JP Morgan as of 10/19/18. Rates and Economic Calendar Data from Bloomberg as of 10/22/18. International developed markets measured by the MSCI EAFE Index, emerging markets measured by the MSCI EM Index. Sector performance is measured using GICS methodology.

    Happening Now                   

    Global equity markets were mixed last week following a choppy trading session. In the U.S., the S&P 500 Index and Dow Jones Industrial Average were able to close in positive territory returning 0.05% and 0.45% respectively. On the other hand, the NASDAQ Composite Index was down 0.64% and the Russell 2000 Index, measuring the nation’s smaller companies, lost 0.29%. Stocks were coming off the previous week where we saw losses generally in the 3-5% range, the worst weekly performance since March.

    Despite an uninspired opening to the week, U.S. stocks looked to avoid geopolitical distractions and get a boost from the early innings of earnings season. Wall Street banks provided a boost to equities early in the week highlighted by strong earnings coming from the likes of Goldman Sachs and Morgan Stanley. In healthcare, Johnson & Johnson and UnitedHealth Group also experienced strong gains and had encouraging forward guidance. Although the picture is not all rosy (as seen by IBM’s 7.6% drop on Wednesday following their earnings release), according to FactSet, with 17% of the companies in the S&P 500 reporting actual results for the quarter, 80% of S&P 500 companies have reported a positive EPS surprise and 64% have reported a positive sales surprise.
    Looking outside the scope of corporate America, it is important to recognize that many risks still persist. Global economic growth rates remain in question and U.S. equities can be affected by international forces. The S&P 500 Index fell sharply last Thursday amid a sell-off in China and geopolitical tensions in Europe. A portion of continued U.S. growth will be dependent on our international trading partners so it’s important to take global economic and political news into consideration.

    This week, we’ll see many companies reporting earnings and forward guidance will be the focus. Equities are falling significantly Tuesday morning following a sell-off in international equities, lingering geopolitical concerns, and slumping industrials and energy sectors. In particular, 3M and Caterpillar fell short on their respective Q3 earnings citing the impact of tariffs. As a result, news that U.S. President Donald Trump and China’s President Xi Jinping are scheduled to meet at the upcoming G20 meeting to discuss trade should be encouraging to investors.

    We encourage investors to stay disciplined and work with experienced financial professionals to help manage their portfolio through various market cycles within a well-diversified framework that is consistent with their objectives, time-frame and tolerance for risk.

    Disclosures: Past performance does not guarantee future results. We have taken this information from sources that we believe to be reliable and accurate. Hennion & Walsh cannot guarantee the accuracy of said information and cannot be held liable. This information is provided for informational purposes only and is not a solicitation to buy or sell any of the asset classes or sectors discussed.

    Investing in foreign securities presents certain risks not associated with domestic investments, such as currency fluctuation, political and economic instability, and different accounting standards. This may result in greater share price volatility. These risks are heightened in emerging markets.

    There are special risks associated with an investment in real estate, including credit risk, interest rate fluctuations and the impact of varied economic conditions. Distributions from REIT investments are taxed at the owner’s tax bracket.

    The prices of small company and mid cap stocks are generally more volatile than large company stocks. They often involve higher risks because smaller companies may lack the management expertise, financial resources, product diversification and competitive strengths to endure adverse economic conditions.

    Investing in commodities is not suitable for all investors. Exposure to the commodities markets may subject an investment to greater share price volatility than an investment in traditional equity or debt securities. Investments in commodities may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors affecting a particular industry or commodity.

    Products that invest in commodities may employ more complex strategies which may expose investors to additional risks.

    Investing in fixed income securities involves certain risks such as market risk if sold prior to maturity and credit risk especially if investing in high yield bonds, which have lower ratings and are subject to greater volatility. All fixed income investments may be worth less than original cost upon redemption or maturity. Bond Prices fluctuate inversely to changes in interest rates. Therefore, a general rise in interest rates can result in the decline of the value of your investment.


    MSCI- EAFE: The Morgan Stanley Capital International Europe, Australasia and Far East Index, a free float-adjusted market capitalization index that is designed to measure developed-market equity performance, excluding the United States and Canada.

    MSCI-Emerging Markets: The Morgan Stanley Capital International Emerging Market Index, is a free float-adjusted market capitalization index that is designed to measure the performance of global emerging markets of about 25 emerging economies.

    Russell 3000: The Russell 3000 measures the performance of the 3000 largest US companies based on total market capitalization and represents about 98% of the investible US Equity market.

    ML BOFA US Corp Mstr [Merill Lynch US Corporate Master]: The Merrill Lynch Corporate Master Market Index is a statistical composite tracking the performance of the entire US corporate bond market over time.

    ML Muni Master [Merill Lynch US Corporate Master]: The Merrill Lynch Municipal Bond Master Index is a broad measure of the municipal fixed income market.

    Investors cannot directly purchase any index.

    LIBOR, London Interbank Offered Rate, is the rate of interest at which banks offer to lend money to one another in the wholesale money markets in London.

    The Dow Jones Industrial Average is an unweighted index of 30 “blue-chip” industrial U.S. stocks.

    The S&P Midcap 400 Index is a capitalization-weighted index measuring the performance of the mid-range sector of the U.S. stock market, and represents approximately 7% of the total market value of U.S. equities. Companies in the Index fall between S&P 500 Index and the S&P SmallCap 600 Index in size: between $1-4 billion.

    DJ Equity REIT Index represents all publicly traded real estate investment trusts in the Dow Jones U.S. stock universe classified as Equity REITs according to the S&P Dow Jones Indices REIT Industry Classification Hierarchy. These companies are REITs that primarily own and operate income-producing real estate.

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