16 October 2017
Bassanese Bites: US Earnings Optimism – Week beginning: 16 October 2017
Global equities remained buoyant last week as there were no new negative shocks from North Korea and even Catalonia backed away from immediately declaring independence from Spain. The upgrade to the global economic outlook from the IMF added to the positive mood, though a spat between US President Trump and a senior Republican Senator (Bob Corker) had Washington and Wall Street again fretting over the chances of a market-boosting tax package getting through Congress anytime soon.
The bottom line was that while Wall Street stocks touched new record highs last week, bond yields and the $US retreated a little. In turn this provided a boost to commodities, especially gold. Globally, notwithstanding distortions caused by America’s recent hurricanes, economic data remains generally positive – which is a nice backdrop given focus is likely to turn to America’s September quarter earnings results over the next few weeks. Thanks to flatter oil prices, and some negative hurricane effects, annual earnings growth for companies in the S&P 500 Index is unlikely to match the double digit pace of the first two quarters of 2017 – but a result closer to 5-6% still seems possible, which should be enough to keep investors in a positive mood.
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