Performance for Week Ending 7/28/2017:
The Dow Jones Industrial Average (Dow) gained 1.16%, the Wilshire 5000 Total Market IndexSM (Wilshire 5000SM) finished unchanged, the Standard & Poor’s 500 Index (S&P 500) finished off 0.02% and the Nasdaq Composite Index (NASDAQ) dipped by 0.20%. Sector performance was mildly positive with 6 of the 11 S&P sector groups finishing higher. The Telecom (+6.99%) sector posted the best gain while Healthcare (-1.26%) was the laggard.
||Closing Price 7/28/2017
||Percentage Change for Week Ending 7/28/2017
||Year-to-Date Percentage Change Through 7/28/2017
*See below for Index Definitions
MARKET OBSERVATIONS: 7/24/2017 – 7/28/2017
The S&P 500 finished the week little changed as investors digested a handful of high profile earnings misses, signs the economy picked up some steam during the second quarter and a rally in the price of oil. Crude posted its best weekly performance since last December following a larger than expected drawdown in inventory levels, a pledge from Saudi Arabia to curtail production levels, and signs US shale producers are reducing capital spending. On the economic front, the preliminary estimate of Q2 GDP showed the economy expanding by 2.6%, slightly below the 2.7% gain expected by economists but well ahead of the downwardly revised 1.2% growth in the first quarter.
Q2 Earnings Season: Second quarter earnings have generally been a positive catalyst for the equity market. Through Friday, 287 members of the S&P 500 have reported results with nearly 78% surprising to the upside. Revenues are also coming in better than expected with 72% of companies beating top-line expectations. Aggregate S&P 500 earnings are tracking at a very solid 10.5% year-over-year rate. If the current pace of growth holds, it would mark the second consecutive quarter of double digit gains.
FOMC Meeting: As was widely expected, the Federal Reserve left interest rates unchanged at the conclusion of its two-day meeting and hinted that it will begin winding down the size of its balance sheet “relatively soon” –likely implying an announcement at the September 19-20 meeting. At a recent testimony to the House Financial Services Committee, Fed Chair Yellen said she anticipates the balance sheet will be "appreciably below" current levels as the Fed unwinds its bond portfolio, although the portfolio will remain higher than levels before the 2008 financial collapse. While policy is expected to tighten over the coming quarters, the expected uptick in global growth should offset the headwind of higher rates.
Bottom-Line - Outlook Unchanged: While we believe the bull market remains intact, elevated valuation levels and unfavorable seasonals during the summer months, raise the odds of some near-term turbulence. The “Goldilocks” environment (not too hot, not too cold), however, should help limit the downside risk. From a macro point of view, the world is enjoying a period of synchronized global growth, which in turn, has led to a favorable turn in the earnings environment. In addition, valuation levels—while not cheap—are far from excessive. If the market were to stage a pullback in the coming weeks/months, it would be viewed as healthy and corrective in nature and not the start of a broader leg lower - in other words, a good buying opportunity, especially for longer-term investors.
The Week Ahead: Earnings will remain in focus during the coming week with 129 members of the S&P 500 scheduled to report results. Included in this group are Dow components: Apple and Pfizer, who will both report on Tuesday. The data calendar will also be relatively busy. Reports of interest include; June pending home sales index, July motor vehicle sales, June personal income and spending, the July ISM manufacturing survey, June construction spending, the July ADP Employment Report and the July ISM non-manufacturing survey. On Friday the closely watched monthly payroll data will be released. According to Bloomberg, non-farm payrolls are expected to grow by 185K while the unemployment rate is forecast to dip to 4.3% (from 4.4%). The Fed speaking calendar will be light with only Cleveland president Loretta Mester and San Francisco president John Williams scheduled to speak.
The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally defined as the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.
Wilshire 5000 Total Market IndexSM represents the broadest index for the U.S. equity market, measuring the performance of all U.S. equity securities with readily available price data. The index is comprised of virtually every stock that: the firm's headquarters are based in the U.S.; the stock is actively traded on a U.S. exchange; the stock has widely available pricing information (this disqualifies bulletin board, or over-the-counter stocks). The index is market cap weighted, meaning that the firms with the highest market value account for a larger portion of the index.
Standard and Poor's 500© Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.
Indices do not include any expenses, fees, or sales charges, which would lower performance. Indices are unmanaged and should not be considered an investment. It is not possible to invest directly in an index.
The individual companies mentioned in this piece were for informational purposes only and should not be viewed as recommendations.
The comments should not be construed as a recommendation of individual holdings or market sectors, but as an illustration of broader themes. This document contains forward-looking statements about various economic trends and strategies. You are cautioned that such forward-looking statements are subject to significant business, economic and competitive uncertainties and actual results could be materially different. There are no guarantees associated with any forecast and the opinions stated here are subject to change at any time and are the opinion of the individual strategist. Information in this report does not pertain to any investment product and is not a solicitation for any product. This material has been prepared using sources of information generally believed to be reliable. No representation can be made as to its accuracy.
Guggenheim Investments represents the investment management businesses of Guggenheim Partners, LLC ("Guggenheim"). Guggenheim Funds Distributors, LLC is an affiliate of Guggenheim.
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*Assets under management is as of 3.31.2019 and includes leverage of $11.3bn. Guggenheim Investments represents the following affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Funds Distributors, LLC, GS GAMMA Advisors, LLC, Guggenheim Partners Europe Limited and Guggenheim Partners India Management. Securities offered through Guggenheim Funds Distributors, LLC, an affiliate of Guggenheim, SI, GFIA and GPIM.
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