It’s been said that profits are the mother’s milk of stock prices. Think about it. If you decided to purchase a small, privately held company, the valuation would largely be determined by the current and expected income the company generates.
While various factors play a role, the same can be applied to a publicly traded company and the general level of a major market index.
That said, Table 1 reviews annual S&P 500 earnings growth (EPS—earnings per share) and compares it to the annual return of the S&P 500 Index.
The Fed has lowered its key rate three times since July to a range of 1.50-1.75%. On Wednesday, it’s widely expected the Fed will hold rates steady.
- As we enter 2020, Powell is determined to prevent the economic malaise in Japan and Europe from washing up on our shores.
- While the consumer remains strong, monetary ammo in the Fed’s toolbox is limited.
The U.S. economy generated a surprisingly strong 266,000 new jobs in November. The jobless rate fell from 3.6% to 3.5%, tying a 50-year low per the U.S. Bureau of Labor Statistics.
The graph below is a three-month average of nonfarm payrolls, which helps iron out monthly volatility. Note the acceleration over the last four months.
As we entered the fall, positive headlines on trade reduced volatility, and stocks moved to new highs.
- In November alone, the S&P 500 Index2 closed at 11 new highs (St. Louis Federal Reserve S&P data).
What happens if the U.S. and China fail to conclude a trade deal? It may simply be public posturing designed to wring out concessions, but the president has a way of shaking things up from time to time.
- On Tuesday, he said he liked “the idea of waiting until after the election” to reach a deal (WSJ).
- He also suggested that he might take aim at other countries.