Here we are in September 2016, and the markets are at or near all-time highs - 18,300+ on the Dow and 2,150+ on the S&P 500. This is remarkable since it was only five or six months ago that these indexes were sharply lower at 15,350 on the Dow and 1,810 on the S&P 500.
During this correction, the one of a similar size in August and September of 2015, and also the very short lived Brexit scare in June, we heard an endless narrative from many media sources and so-called experts telling us that the markets and the economy are doomed, and we were destined for a total collapse.
In our updates in September 2015, February 2016, and our Brexit update in June 2016, we repeated the same advice and perspective: remain calm and disciplined, and follow our long-term strategy. We also quoted credible analysts and experts that shared our perspective. It turns out that, once again, our advice was accurate.
We now want to offer our perspective and advice going forward. We have a very divisive election occurring and a lot of confusion about where markets may head from here. There is a lot of media, advertising, and promotion of the idea that the next bubble is about to pop. These predictions are often attached to the sale of a product of one kind or another or politically driven. How many times have we watched these so-called experts predict a date by which we will absolutely see a horrible crash and ruin in the economy or the world itself? Then the time frame for their disastrous forecast comes and goes, and no one ever seems to hold them accountable. We will certainly face ups and downs in the markets and the economy in the future, and nobody knows when it will occur. We know how to deal with downturns in the markets or the economy, and we have done it many times over the years.
So where is the economy now? There is ample evidence of many improvements in the economic data. Let’s look at some indicators. The stock markets have recently reached all-time highs, which is one indicator on the economy all by itself. Additionally, jobs, wages, and labor hours all beat expectations. The labor force was up 400,000 in July 2016 and 2.2 million in the past year. We are seeing higher forecasts for GDP growth for 3rd quarter 2016 from the Atlanta Federal Reserve and others. With 434 of the 500 companies that comprise the S&P 500 reporting earnings so far this quarter, 71.1% have beaten estimates, while 11.3% have matched. That means only 17.6% have missed their earnings estimates. Growth in this economy appears to be accelerating.
We remain optimistic about the economy in general, even in an election year; yet, we are prepared in our strategy to ride out periods of uncertainty and volatility. We will continue to utilize our long-term strategy of diversification and discipline.
Ryan Craner, John Park, and Staff
These are the opinions of Ryan Craner and John Park and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Diversification and asset allocation strategies do not assure profit or protect against loss.
Registered Representatives, securities offered through Cambridge Investment Research Inc., a broker-dealer, member FINRA/SIPC. Investment Advisor Representatives, Strategic Planning Group LLC., and Cambridge Investment Research Advisors, Inc., Registered Investment Advisors. Cambridge and Strategic Planning Group are not affiliated. This communication is for individuals residing in the states of Alabama, Arizona, California, Colorado, Florida, Iowa, Idaho, Kentucky, Montana, Nevada, Ohio, Oregon, Pennsylvania, South Dakota, Texas, Utah, Virginia, Washington, and Wyoming.