#218 Corporate Confidence, Cautious Consumers

“Drive for Show, Putt for Dough”

Corporations are Confident

Drive for Show, Putt for Dough is a common saying and from a political macro standpoint Trump has hit a long drive onto the fairway with the corporate tax proposal but it doesn’t matter until it gets in the hole. There really hasn’t been execution, there has been no putting on the government front.

However, corporate America is executing. With a little over 1/3 of the S&P reporting so far, over 68% are beating expectations. Earnings growth is expected to be around 11% and that’s well above GDP. Corporate America is doing more than economic growth, they are also executing on their plans. At this rate, we should have a trailing 12 month earnings of above $120 share on the S&P 500. What’s important about that is it is the first time we’ve been above the Q2 2015 rate. That’s over a year’s worth of underperforming on earnings that we are catching back up to.

Consumers are Cautious

Consumers took a bit of the first quarter off. This is showing up in two places, auto sales and jobs numbers. Auto sales are a big ticket item that can push GDP up when cars are being purchased. When you’re not buying cars it pushes it down. As for the jobs number, within the administration there has been a three month hiring freeze. That shows up in GDP because government workers spend money like everyone else. When you are talking about the government spending less money, one of the ways that happens is by not hiring people. That’s not necessarily a bad thing. In the short term it goes into the GDP and the jobs number but longer term that is transitory.

There are still more earnings announcements coming our way and jobs data on Friday to look towards. Was the hiring freeze what impacted the jobs number in the first quarter? We will be looking to see if we are moving past the weak first quarter as it pertains to jobs.

Greg Powell, CIMA
President/CEO
Wealth Consultant
Email Greg Powell here
Ashley Page, JD, MBA
Senior Vice President
Wealth Consultant
Email Ashley Page here
Trey Booth, CFA®, AIF®
Senior Vice President
Wealth Consultant
Email Trey Booth here
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Summary
Corporate Confidence, Cautious Consumers
Title
Corporate Confidence, Cautious Consumers
Description

With a little over 1/3 of the S&P 500 reporting earnings so far, over 68% are beating expectations. Meanwhile, a lower GDP and lower jobs number means consumers are more cautious. There are more earnings this week as well as new jobs data.

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