Down at the corner of Wall and Broad Streets, nothing succeeds like success. That is especially true when companies turn in a better than expected performance. Wall Street hates surprises; unless of course they’re good surprises.

This week marks the beginning of the Fall Earnings Season and a whole slew of publicly traded companies are reporting results for the 3rd quarter. The anticipation on the street was not terribly good.

Indeed, FactSet — who keeps tabs on such things – had set expectations for a decline of 4.1% in comparison to the same quarter a year ago. As you might have guessed, fears of negative impact from the still ongoing US/China trade ‘discussions’ have some people thinking that in the middle of every silver lining lies a very dark cloud. And yet, in spite of an extra serving of challenges we find some surprisingly good numbers, to wit; of the 43 S&P 500 companies who reported earnings before the opening bell on Thursday, a remarkable 86% have come in with better than consensus expectations.

Speaking of ‘Better than expected’ things (which are much better than “Not-as-bad-as-we-thought” things); the just released Fed Beige Book has a few noteworthy items. For instance:

  • September: “On balance, reports from Federal Reserve Districts suggested that the economy expanded at a modest pace through the end of August.”
  • October: “The US economy expanded at a slight to modest pace since the prior report as business activity varied across the country.”
  • October: “Labor markets remain tight.” “…stronger employment growth continued to be constrained by tight labor markets, with Districts citing shortages of both high- and low-skill workers.
  • “The overall Beige Book sentiment has softened but does not signal a dramatic decline in business activity.”

Meanwhile, across the pond:

Germany also turned in some ‘not as bad as we thought’ news with their ZEW survey. That’s a monitoring tool similar to our ISM Purchasing Manager’s Index. While still negative it came in at a -22 when a -27 had been expected.

Brexit: EU and UK announced an agreement (in general principle) on a deal that would save the UK from leaving the EU under conditions that was feared to generate complete chaos. Although markets on both sides of the Atlantic expressed relief this agreement is not yet a done deal. EU leaders have approved it as well as have most of their UK counterparts so this is good news in the sense that it is definitely a new high-water mark. However, UK and EU parliaments must yet vote and the UK may face hard opposition from their Democratic Unionist Party.

It is often said that the devil is in the details. But then, so are the angels.

Ron’s Market Minute – Just a Bump?

It is fascinating to me to watch how quickly markets can reverse.  Sometimes it happens over a couple of months – which is pretty normal, but sometimes it happens in the space of just a few days.

If you are a regular reader of this newsletter, you’ve heard my concerns about the great strength of the conservative parts of the investment universe. If you had the good fortune to hold only the very conservative Consumer Staples, Real Estate investments and Utilities (shown as red, green and teal on the chart below) since Jan 1st of this year, you and your crystal ball would be having a pretty incredible year. And you would be the only person that I know who did that. 

Hindsight is so clear.

However, over the past eight days those three holdings barely managed to stay even, and the aggressive holds – the Industrials, Financials, and Consumer Discretionary holds (shown as pink, turquoise, and dark blue) have shot out the lights. See the chart of the past eight days:

Now as always, the past doesn’t tell us what the future will bring. It does, however, allow us to ask some good questions. For instance: are the past eight days an indication that markets are rotating from the conservative to the aggressive-?  Unsurprisingly, that is a pretty common occurrence about this time of year.

OR, do the past eight days indicate just a bump that means nothing? Eight days certainly do not make a trend, but they give us a clue as to what areas to focus on as we watch for growth opportunities in these closing months of the year.

~ Chart and return numbers from FastTrack Software

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk
www.denkinvest.com

This weekly article reflects news, commentary, opinions, viewpoints, analyses and other information developed by Denk Strategic Wealth Partners and/or select but unaffiliated third parties. DSWP provides Market Information for illustrative and informational purposes only. If you wish to receive this weekly commentary by email please contact us at 602-252-8700 or by e-mail at lindaw[@]denkinvest.com. If you are receiving this commentary via email and would prefer not to please let us know either by email or phone.

Ronald Denk is an Advisory Representative offering services through Denk Strategic Wealth Partners, A Registered Investment Advisor. He is also a Registered Representative, offering investments through Lincoln Financial Securities Corporation, Member FINRA/SIPC.

Denk Strategic Wealth Partners is not affiliated with Lincoln Financial Securities Corporation. Information in this commentary is the sole opinion of Denk Strategic Wealth Partners. Past performance is no guarantee of future returns. All market related investments involve various types of risk, which include but are not restricted to, credit risk, interest rate risk, volatility, going concern risk, and market risk.

The Update provides information of a general nature regarding legislative or other developments. None of the information contained herein is intended as legal advice or opinions relative to specific matters, facts, situations or issues. Additional facts, information or future developments may affect the subjects addressed in this document. You should consult with an attorney, accountant or DSWP planner about your particular circumstances before acting on any of this information because it may not be applicable to your situation.

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*The indices are representative of domestic markets and include the average performance of groups of widely held common stocks. Individuals cannot invest directly in any index and unlike investments, indices do not incur management fees, charges, or expenses, therefore specific index returns will be higher. Past performance is not indicative of future results.

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