Of course, it’s always more fun when the market is doing well, and we are continuing our upward trend, supported by robust earnings growth. For quarter 2, 80% of the companies in the S&P 500 index reported earnings higher than estimated, and 73% posted higher revenues than analysts had forecast. That’s a record—the highest number of surprises since FactSet begin gathering the data in the third quarter of 2008.
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Market Views
It’s the Earnings that Count
History shows that stock prices generally have followed earnings, so it is nice to see actual and projected EPS moving up, even as earnings forecasts often turn out to be too rosy. Happily, the number of companies (79.8%) exceeding expectations in Q2 2018 was far better than the average beat-rate over the prior five years.
John Buckingham, The Prudent Speculator, www.theprudentspeculator.com, 877-817-4394, September 10, 2018
Yes, It Is…
Thanks to the huge cut in corporate tax rates at the start of the year, 2018 earnings are easily beating the expectations. Even better, when you net out the tax cut benefits from these numbers, “organic” growth is still rising by double-digit rates. Estimates for 2019 earnings growth for the S&P 500 Index currently stands at 12.2%. That number has actually risen during the last two months. Back in June, EPS growth was pegged at 11.0%. Usually, earnings estimates sink as time goes by. The fact that they have increased should be taken as a very bullish sign for both the economy and the stock market.
David C. Jennett, The Investment Letter, P.O. Box 6170, Holliston, MA 01746, 800-542-5018, August 27, 2018
Rate Hike Coming
Wages rose 2.9% last week, beating estimates and sparking increased optimism in the economy. Last week’s 2.9% gain marks the strongest wage growth since 2009. The improved wage data, in addition to other strong economic data such as GDP growth and household net worth, provides the Federal Reserve the support and evidence it needs to continue raising rates, as it has been for some time now. The third rate hike this year is expected to come at the end of September when the Federal Reserve Open Market Committee convenes to discuss monetary policy.
Ron Rowland, All Star Investor, www.AllStarInvestor.com, 800-299-4223, September 10, 2018
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The next Wall Street’s Best Dividend Stocks issue will be published on October 10, 2018
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