Brian Gilmartin | Sep 26, 2016 12:03AM ET
Let’s take a quick look at revisions within the S&P 500: fc-eps-estimate-revisions . Hopefully this spreadsheet, which has been updated weekly for years, is helpful to readers.
Note how just within the last week, 412 of the S&P 500 companies have seen their estimates changed/tweaked/adjusted by Street analysts. The fact that over 80% of the S&P 500 saw estimate revisions this past week was surprising, but the takeaway for readers is that Street consensus is CONSTANTLY changing to reflect competitor disclosure, economic data change, and a host of other variables. (Intel's (NASDAQ:INTC) raised guidance could have something to do with this – note the week of June ’14, and see what Intel’s raised guidance did to the percentages).
Conclusion: What’s unusual about the last 4 weeks worth of data is that normally—within a quiet period of earnings reporting since 499 of the S&P 500 have reported their Q2 ’16 results—the negative revisions far outweigh the positive revisions, except for Q3 ’16, where for the last 4 weeks, positive revisions have improved steadily.
Look at the above spreadsheet again and note how positive revisions as a percentage keep ticking higher. This is an important trend change and it’s been in evidence for a while (and bears repeating). It also speaks to what was written prior to this weekend’s post here and here.
h3 So Why the Optimism For the Next 6 Months? /h3The election and the possible ascension of Mr. Trump is the Rumsfeld-ian, “Known Unknown”.
However, In Bespoke’s Weekly Report, which comes out every Friday afternoon and remains a wonderful source of great information on the broad asset classes that comprise the investable market, Bespoke notes that:
“The betting markets are still heavily favoring Clinton by 2 – 1 margin.”
Bespoke also noted that Clinton’s lead over Trump today is almost identical to Obama’s lead over Romney at this time in 2012.
Tonight’s first debate could be a pivotal event.
(Please, the above is not a political statement in the least. As an advisor, my job is to assess portfolio risk and market risk for clients, and to try and discern if the US capital markets are more comfortable with one candidate over the other.)
Jeff Miller’s weekly “The Week Ahead” gives some excellent thoughts on the election cycle. It will be interesting to see how polling results change (if they change at all on Tuesday and next week) and how the market responds, if it does at all.
h3 Thomson Reuters S&P 500 earnings Data (by the numbers):/h3Conclusion: Sentiment data – at least AAII (American Association of Individual Investor) data – continues to indicate a lack of real optimism and even downright pessimism towards expected, future, stock returns, which in and of itself, should be good reason to be long or overweight the S&P 500 within balanced portfolios. Per AAII directly, bullish sentiment has been below it’s historical long-term average of 38.5% for 79 of 81 weeks.
I’m expecting the next 6 months—from October through early April ’17—to be pretty decent for the S&P 500. Technology should be the clear sector winner although it is now overbought.
For readers, be prepared – risk comes on quickly.
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