Amid today’s extraordinary levels of uncertainty and speculation, we welcome anything that can offer some sense of visibility. Earnings season tends to be just that, giving public companies a platform to formally update the market on their recent performance and future outlook. While guidance in this environment is not what it normally is, the market’s reaction to what is said offers insightful perspective into the thought process of active participants.

During the first two weeks of earnings season, we heard from companies across sectors, representing almost a quarter of the S&P 500 Index’s market capitalization. For this analysis, we focus on the change to consensus current fiscal year (FY1) EPS estimates. This should not only capture actual results reported, but the outlook for the rest of the year. For companies that have already reported, estimates have come down more than 20%, with an initial modest revision going into earnings and a larger cut post the report.

On average, stocks were flat across sectors despite these major cuts to earnings expectations. Certain sectors particularly stand out — FY1 EPS expectations for Energy stocks came down an additional 42% after earnings reports and stocks were up 1% in response while Consumer Discretionary expectations were cut an additional 33% and stocks rose 6% on the news. While there are nuances not captured by these averages, from a high level it implies company results and outlooks were roughly in line with buy-side expectations — in some cases better — refuting one of the oft-cited catalysts for a correction to the rebound that some argue has gone too far too fast.

We do not claim to know where the market is headed from here, but early signs from earnings season give us reasons to be optimistic that, for now, the bottom is in.

Print PDF > Taking Cues From the Market

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

The S&P 500 hit its recent peak on February 19th, 2020. Just sixteen trading days later it entered bear market territory and by March 23rd, the S&P 500 was down 33.2% from its all-time high. The intensity and speed of the sell-off surpassed both 1987 and 1929, two infamous years in investment history. Since March 23rd, the S&P 500 has rallied 27.4% through April 14th prompting the question: have we already seen the market bottom?

Identifying a market bottom is a near impossible task, one that is much easier with hindsight. Most bear markets see stocks rally 10% or more before falling back down and hitting a new bottom. The Global Financial Crisis produced five such bounces before finding its floor in March 2009. Near the turn of the century, the Tech Bubble produced three “false” rallies. Based on these data points, history would tell us that there are still further losses ahead. However, every bear market is unique and this one certainly fits that bill. Given the speed of the decline, might we see a faster recovery? The answer to that question is likely predicated on how well the spread of COVID-19 is controlled and whether we see a second wave of infections.

Print PDF > Was March 23rd the Market Bottom?

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

The last week in the markets has seen a huge increase in market volatility. This week’s chart examines the largest daily moves (the ten worst and ten best) in the S&P 500 index since 1950, in an effort to provide some historical context to the recent volatility. As the chart shows, the recent market moves are not unprecedented, but they are historic. Over a course of just six trading days, the S&P 500 had three of its worst — and one of its best — days in the last 70 years. Beyond just the magnitude of the market moves, this week’s chart attempts to highlight a few important reminders for investors.

First, market volatility tends to move in both directions. We have color-coded the market moves by event, and it is worth noting that in the wake of the 1987 stock market crash, the Global Financial Crisis, and the recent volatility around the coronavirus, U.S. equity markets have seen some of the worst — and best — days ever. While all this volatility clearly creates opportunities for rebalancing, the market volatility can create a significant amount of short-term timing risk. This is one reason why clients should consider gradual rebalancing over a period of days or weeks to limit the risk of short-term market volatility.

Print PDF > Market Volatility Moves in Both Directions

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.