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Stormy equity markets, need some Dramamine?

March 26th, 2018

Last year we were blessed with quiet equity markets. Not too much drama nor controversy resulting in a gentle environment for equity markets: A calm cruise, no champagne spillage, no seasickness, no Dramamine needed.

This year feels a little stormier, a sea full of chop, wind gusts, errant waves, strong currents, poor visibility, confused seas, forget the champagne – I need some dry land, now.

If the surface of the sea is choppy and we cannot take the sight of landfall at the moment, should we be concerned? How long is this storm going to last? What’s it look like really; beneath the waves?

Beneath the waves all is normal: the folks that work for the companies in our portfolios are still getting up, washing up, dressing up and going to work every day on our behalf. Every day they provide a value for which they, on our behalf, extract a profit, ultimately we will receive a portion of that in the form of a dividend. And, the value of the brands we own should continue to appreciate as more satisfied customers become long-term clients.

Stormy seas pass. Noise du jour aside, the fundamentals of our economy and our companies remain sound. According to the Federal Reserve’s Open Market Committee, economic growth has strengthened, and employment forecasts have increased. The storm will pass when it does; no one knows when the current consolidation shall pass. My best estimate is we will wait until actual earnings are reported, I would guess late fall by the time the dust settles.

According to our Raymond James Research*, consensus S&P 500 earnings estimates for 2018 are expected to reach $157.10/share increasing to $173.58/share in 2019. We finished 2017 at $132.41/share. From a valuation perspective, domestic equities represent a better value than at any time during the last two years* as a result of a combination of earnings growth, and the recent market consolidation. Let’s see, compared to last year, this year’s economy is getting better, earnings are increasing, and stocks are cheaper; maybe we should consider getting some more stocks.

Let’s pour some more champagne, forget the Dramamine, let’s go shopping.

Our portfolios favor Domestic and Foreign Equities: our cash position has decreased in recent weeks.

Carlos Dominguez – Portfolio Manager, RJ

*Michael Gibbs, Director of Equity Portfolio & Technical Strategy

https://consolidatedequityresearch.rjf.com/Cer/Document/ViewDocument?key=277207N

 

Sources are being provided for information purposes only Past performance may not be indicative of future results. Any opinions are those of Carlos Dominguez and not necessarily those of Raymond James. This material is being provided for information purposes only and is not a complete description, nor recommendation. The information has been obtained from sources considered reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that any statements, opinions or forecasts provided herein will prove to be correct.profit or loss regardless of strategy selected. There is no guarantee that any statements, opinions or forecasts provided herein will prove to be correct. Links are being provided for information purposes only.

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