#157 Low Expectations Cause The Markets To Step Back

The markets step back

Investors saw the markets take a step back last week. The cause came from the low expectations on the earnings reports which we will start seeing later today. Right now the markets are being driven by the fundamentals. We like the markets to be driven by the fundamentals but these fundamentals are not the good kind.

First quarter earnings are expected to come in at -7.9%. This will be the worst quarter since the 2008 recession. There is an argument that the energy sector is the reason for this. But if you take that out, the market is still down -6.3%. This means the draw back is spreading across the economy. The good news is that if the earnings expectations bar has been set low, the markets might be able to jump over it and bring some momentum to the markets.

Interest rates update

We still believe that an interest rate hike for the month of April is off the table. While this has given some strength to the markets, the Fed cannot be quiet forever. The discussion will pick up again in June.

Important IMF meeting

The International Monetary Fund will be holding its spring meeting this week. The key point of discussion will be about how these governments are not spending much, if anything, on infrastructure in their countries. In the United States the combined the local and national government spending is at 17.6% of our GDP. This is the lowest it has been is 66 years. If you look at the advanced economies around the world, many of the central bank heads, like Janet Yellen, are essentially saying that governments are going to have initiate some fiscal help as they have fired all of their bullets. The IMF has done all it can and now it is up to the national governments to step in and help.

What is holding back government spending?

Each of the advanced economies have some unique problems. The Eurozone has the Syrian refugee crisis. In the US, it is the aging population’s impact on Social Security and Medicare. It is issues like these that keep governments from spending money on infrastructure which would benefit the economy both domestically and internationally.

Economic indicators this week

This week we will also be watching the retail sales and manufacturing reports. Retail sales usually hit their peak around this time of year. Manufacturing has been a big weakness for the US but we are seeing stronger manufacturing numbers lately. These are things to keep an eye on, as they give us a good indication of how the economy is doing.

We are enjoying your comments and questions. Keep them coming.
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Ashley Page, JD, MBA
Senior Vice President
Wealth Consultant
Email Ashley Page here

Bobby Norman, CFP®
Senior Vice President
Wealth Consultant
Email Bobby Norman here

Trey Booth, CFA®
Senior Vice President
Wealth Consultant
Email Trey Booth here

Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Economic forecasts set forth in this presentation may not develop as predicted.

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