Client submitted questions
Our first question from a client is, “What caused oil to break through $50 per barrel last week?” We believe it was caused by geopolitical risks, the dollar being weighed down by the Fed, and falling US oil production.
Client question two is, “With all the negative issues going on around the world, where is the good economic news?” We see good news in the fact that unemployment is at a seven year low, inflation and income have adjusted up, consumer spending and sentiment is up, car sales are at a ten year high, gas is cheap, and the housing market continues to be strong. These are bright spots in a bombardment of negative economic news.
Outlook for earnings season
After focusing on the Fed for the past few months, we now turn to earnings season while still keeping one eye on the Fed. It looks like expectations are for a -5.1% of earnings growth. While that sounds like bad economic news, the majority of that negative number is coming from the energy sector. In fact, 6 out of 10 S&P 500 sectors are expected to have growth in earnings. Remember that it’s not about the earnings. It’s about beating the earnings expectations (More in the video).
Emerging markets are not helping global economic news
The International Monetary Fund (IMF) has been meeting in Peru for the past few days. They were hoping to show growth in Latin American countries but unfortunately have not seen much of that. As we have discussed before here on Investors’ Insights, emerging markets often can lead regions out of negative growth. The problem we are seeing now is that many of those countries do not have the balance sheet strength they had two or three years ago and, therefore, are unable to lead the way.
The harder solutions
If these countries would have had better structure reform a few years ago, they might be in a different position. These emerging markets, like Brazil, created the easier short-term solutions instead of the harder, long-term solutions that would have lead to better growth. Now they are going to be forced to work on those harder solutions. This is why the IMF data has the international economy at its lowest growth since the downturn of 2008.
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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.
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