Q2 earnings are projected to rise by 6% over last year, a solid performance if that is how it turns out. Q1 GDP was upgraded from .7% to +1.2%, which is a bit low but all Q1's are low and this beat last years number. Regarding valuation, the 12 month trailing GAAP PE is 24.3, up a bit from last month and it remains moderately overvalued compared to my 30 year trimmed average of 19. The Fed hiked short term rates by a quarter of a point and the increase in my monthly money market income will keep me in box wine through the end of 2017! While short term rates are going up, long term rates have been falling for a few months, flattening the yield curve. Normally this would be concerning, perhaps the bond traders see a recession on the horizon. But, things are not normal, and with some large overseas economies still sporting negative interest rates, perhaps money is just chasing a safe higher yield in the US. Economic statistics are a bit of a concern, will falling new car sales (from record levels in 2016), soft home sales, soft retail sales, and a sharp drop in consumer confidence this month. A soft patch, or the start of something bigger? One explanation I have heard for sluggish business investment is that CEO's are waiting for the details on tax reform before they will commit to spending big bucks. Technically on a long term monthly chart, things look good as the S&P remains in an uptrend channel that has been in place for several years.
On a long term basis, the market remains a bull market IMO, but the soft economic data recently raises a caution flag that we need to keep a close eye on developments.
Note: I like to look forward in time, and I am always skeptical about believing future prognostications. I have stopped quoting the Atlanta Fed GDPNow stat, since they seemed to start quite optimistic and then drop the estimate each month. They got close by the end of the quarter, but I just did not find their exercise to be useful.
Edited by Rich C, 21 June 2017 - 09:55 AM.