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November 1
Reading The Markets Premium Content:
Earnings continue to roll out, and based on the latest data from S&P Dow Jones, 339 companies in the S&P 500 have reported results. Of those, 75.2% have beaten estimates, while 17.1% have missed, and 7.7% have met. That is better than the average since the second quarter of 2012, which shows 69.8% have beaten, 17.1% have missed, and 9% have met.
(Data from S&P Dow Jones)
Earnings Facing Tough Comps
Currently, the data shows that earnings for the third quarter are expected to decline by 3.26% versus last year. It would mark the first decline in earnings in 2019. However, it is worth noting that the third quarter of 2018, was a record quarter with earnings per share of $41.38 and a growth rate of 32%, not an easy comparable.
(Data from S&P Dow Jones)
Earnings Still Expected to Grow in 2019
Overall earnings in 2019 are now expected to rise just 5%, which is nothing fantastic, which is likely the reason we have seen such a horrible market throughout most of 2018 and 2019. However, growth is expected to return in 2020, and still, estimates show an increase of about 11.5%, with earnings per share rising to $177.55. It means the market is currently trading for roughly 17.1 times 2020 estimates.
(Data from S&P Dow Jones)
Turning to 2021
It would at least indicate to me by some extend the market based on 2020 estimates is at or approaching full valuation for 2019. 17 is the multiple I have been targeting all year.
Apply that same approach to 2021, I am currently model earnings of $197.21, giving the S&P 500 a PE ratio of about 15.5. At 17 times my 2021 earnings estimates, I show a fair value for the S&P 500 at roughly 3,350. I am also modeling earnings of $162.98 in 2019, and $179.77 in 2020. So slightly higher than the S&P Dow Jones operating estimates.
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This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
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This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
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This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
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YouTube Video VVVNT0lJcjFvb1JzU3VrUEw3cktOcjBWSFEuQkJGalJwVkJLak0
(Data from Mott Capital)
It would suggest to me that as investors begin to turn their focus away from 2019, the prospects of 2020 and 2021 will help to lift the markets higher.
2019 Recession is Officially Dead
Additionally, still, there are no signs that a recession is coming. The GDP print for the third quarter of 2019, all but guarantees there is no chance for a 2019 recession since you need two consecutive of contract for a recession. It not to say you can’t have one that starts at the end of 2019 and goes into 2020, but the theory of a 2019 recession is all but dead.
No Recession in 2020?
I continue to believe that a recession is not on the horizon. The ISM PMI for October was 48.6%, which corresponds to a GDP growth rate of about 1.6%. Meanwhile, job and wage growth in October was healthy, with wages rising by 3%. This despite a GM strike and the issues that continue to plague Boeing and the production of its 737 Max.
We’ll see where we go next, but at this point, I am beginning to believe that 2020 will be a better year for the economy. At least that is the message that the Nikkei, DAX, KOSPI, Copper, ACWI, and Semis would suggest, just too name a few.
-Mike
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This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
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