Greetings Friends,
There’s been a lot going on in the market so I wanted to drop in for a mid quarter update.
First quarter earnings season is almost over – and the results have been excellent.
With 90% of the S&P 500 reporting, earnings are up 14.2% from the same period last year. That’s a huge year-over-year increase.
Revenue is up 7.7%.
73.3% of reporting companies have beaten earnings estimates.
This earnings growth represents an important turning point for the S&P 500.
The S&P 500 was trapped in an earnings recession for a year and a half – earnings fell for 6 consecutive quarters from 2015 to 2016. You can see that in the chart below.
But now – as you can also see, earnings are back on the upswing and expected to continue expanding for the rest of 2017.
This return to earnings growth is the #1 reason US stocks are having another good year.
The S&P 500 is up 7.7% in the first four months of the year.
If this pace continues, the index would deliver a total return of 25%, including dividends, in 2017. Take a look at the year so far below.
My wealth management clients and I have been cashing in on this growth.
We love to invest in great American companies. Global leaders that still have plenty of growth in the tank. Companies that play a huge role in our every day lives.
These companies crushed it in the first quarter. And almost every one of my clients owns at least a few of these stocks.
Let’s take a look.
Tesla (TSLA) is leading the pack, up 44% on the year.
Facebook (FB) is up 31% this year.
Netflix (NFLX) is up 26%.
Apple (AAPL) is up 29%.
Amazon (AMZN) is up 24%.
Google (GOOG) is up 20% this year after jumping higher on strong first quarter results.
This is a list of the most powerful and innovative companies in the world. They are basically kicking butt and taking names.
They have definitely seen big gains in the last few years and in 2017. And I do expect these stocks to be volatile in the short run.
However – I think there is still plenty of growth ahead in the long run.
I am encouraging my clients looking for growth to own these stocks for the long haul.
If you already own shares, think about adding a few more.
If you don’t own any shares, there is still plenty of time to profit.
What Should I Expect for the rest of the 2nd Quarter?
US and global stocks are off to another good start this year and have strong upward momentum.
We’re seeing some awesome gains from our favorite stocks like Facebook, Google and Amazon.
From a seasonal perspective, the S&P 500 is moving into its weaker half of the year.
In the last 100 years US stocks have typically performed better from November to April than May to October.
However – that’s basically a crap shoot on a year to year basis. And even if stocks do weaken, it’s no reason to panic.
Short-term volatility is a normal part of the stock market and investing.
In the long run – stocks spend a heck of a lot more time going up than going down.
Although I am expecting volatility, I am expecting stocks to continue grinding higher in 2017 as earnings continue to expand.
I’ll be back before then – but in the meantime – I want to share an update on cannabis stocks.
A bear market happens when a stock falls 20% from its high.
The MJIC Cannabis Index is down 21% from its 2017 high.
There are two ways to handle this weakness.
Aggressive: if you are a long-term investor, this is a chance to buy shares on a dip.
Conservative: if you have a shorter time horizon or less tolerance for risk, you have the option of taking some profit or trimming your position. Although I don’t expect it to happen, the cannabis sector has seen extended weakness in the past. If this decline makes your nervous, that is an important signal.
Either way – cannabis stocks need to be managed a little more closely than regular stocks. So if anyone has any questions, give me a buzz and we can discuss.
Have a great week. I’ll be back in a few weeks with another update.
Your Investment Partner,
Mike
This report is for entertainment purposes only. Every investor should consult with an investment advisor before making investment decisions. The Vodicka Group, Inc. is not a broker/dealer. We do not receive compensation for mentioning stocks. At various times, the clients, publishers and employees of Vodicka Group, Inc., may buy or sell the securities discussed for purposes of investment or trading.
