Strong Corporate Earnings and Unfavorable Inflation Expectations

It wasn’t just the price of pork chops.

Last week, as investors weighed the news, strongcorporate earnings were offset by higher grocery prices and rising numbers of globalcoronavirus cases.

Solid corporateearnings weighed favorably.

So far, 25 percent of the companies in theStandard & Poor’s (S&P) 500 Index have reported first quarter earnings,and 84 percent said profits grew faster than expected, reported John Butters ofFactSet. The blended earnings growth rate for the S&P 500 (whichincludes estimated earnings for companies that have not yet reported and actualearnings for companies that have) was 33.8 percent last week. For context, the 5-year average earnings growth rateactual earnings) for the S&P 500 was 6.9 percent as of last week.

It’s important to remember the impact ofearnings is often muted as earnings expectations – good or bad – tend to bepriced into the market long before they are reported.

Inflation expectationsweighed unfavorably.

Investors were concerned about inflation – andso were consumers. While the Federal Reserve and many economists believe we’llsee a fleeting uptick in inflation, others think the increase will persist. “…Aconsistent drumbeat of price hikes from major companies, consumer reports, andmarket data suggest the world may not be going along with their conclusion,”reported Dion Rabouin of Axios.

It is likely markets may pay particularlyclose attention to Federal Reserve statements about inflation and interestrates this week.

Rising numbers of Covid-19cases around the world tipped the scales.

Concerns about India’s coronavirus surge,Japan’s state of emergency, and rising numbers of cases around the world causedinvestors to reassess expectations and some sold shares of companies that wereexpected to benefit from the re-opening of world economies. Yun Li and MaggieFitzgerald of CNBC reported:

“The sell-off inshares that are tied to a successful reopening came as the World HealthOrganization warned that global coronavirus infections were edging toward theirhighest level in the pandemic. In the United States, while the country ismaintaining a pace of 3 million reported vaccinations per day, about 67,100daily new infections are still being recorded.”

Despite uncertainties, most (67 percent)professional investors who participated in Barron’s Big Money Poll saidthey were bullish on the outlook for stocks in the next 12 months. Just 7percent were bearish.

Major U.S. stock indices finished the weekflat or slightly lower. U.S. Treasuries rallied briefly before finishing theweek flat.

Best regards,

Womack Investment Advisers, Inc.

WOMACK INVESTMENT ADVISERS, INC.
Oklahoma / Main Office: 1366 E. 15th Street - Edmond, OK 73013
California Office: 4660 La Jolla Village Dr., Ste. 100 - San Diego, CA 92122
Phone (405) 340-1717 - Toll Free (877) 340-1717

Website: www.womackadvisers.com

Womack Investment Advisers, Inc. (WIA) is a registered investment adviser whose principal office is located in Oklahoma. Womack Investment Advisers, Inc. is also registered in the State of California, the State of Illinois, the State of Indiana, and the State of Texas. WIA only transacts business in sates where it is properly registered, or excluded, or exempted from registration requirements.

Dogs may be some of the world’s most effective disease detectives. In January, before COVID-19 was known to have arrived on our shores, NPR wrote about the dogs’ ability to smell disease. The host of Medical Monday interviewed Maria Goodavage, author of Doctor Dogs: How Our Best Friends Are Becoming Our Best Medicine , who said: “With ovarian cancer, there's not much great testing for early detection. I heard about these dogs at the University of Pennsylvania Veterinary Working Dog Center that are able to smell ovarian cancer. They're able to detect it as early as stage one. We're not even talking tumors here. They're able to detect ovarian cancer in one drop of plasma from a woman with ovarian cancer.” Doctor dogs also are being trained to detect the novel coronavirus. Reuters reported, “A study recently found dogs can identify infected individuals with 85 percent to 100 percent accuracy and rule out infection with 92 percent to 99 percent accuracy.” Airp

David Kostin, the Goldman Sachs chief U.S. equity strategist, wrote in a note to clients “The U.S. election is just 81 days away and represents a significant risk to our year-end forecast.” Analysts often mention the uncertainty surrounding presidential elections in the United States, and this year is sure to be no exception. However, John Stoltzfus, CIO of Oppenheimer Asset Management told clients, “Embrace the uncertainty.” His research showed that historically, elections haven’t done much to prevent stocks from going up regardless of which political party prevails. Furthermore, Stoltzfus writes, “Uncertainty usually comes with opportunity and risk—two considerations essential in making investments.” A study by Deutsche Bank showed that in Presidential election years in which the contest is thought to be “close”, stocks generally go up until a month or so before the election, then pull back a bit, and then resume their uptrend from around the election through the end of the

Warren Buffett during an interview with CNBC’s Becky Quick on February 24, 2020. It turned out to be another year during which the billionaire investor shied away from game-changing acquisitions in a pricey market even after a sudden market cash and as his company holds a massive cash balance. Gerald Miller | CNBC Warren Buffett’s Berkshire Hathaway made some big purchases in 2020, but the biggest Buffett buy speaks to the big challenge the company will continue to face: there was nothing it could find at a better price than its own shares. Berkshire bought back more than $18 billion in its own shares last year, through October, almost twice as much as Buffett spent on his next biggest acquisition, the $10 billion natural gas assets transaction with Dominion Energy, which including the debt acquired, was the largest acquisition since 2016. Taken at his word — which he has earned — that he won’t do a share repurchase just to prop up the stock, the big buyback was a

Get E-mail Alerts When Greg Womack -- Oklahoma Financial Adviser Sends news releases.
Email Address
Please enter Email address. Invalid Email Address	Subscriber login

1.	Money
2.	Estate
3.	Finance
4.	Wealth
5.	Investing
6.	Advisor
7.	Gold
8.	Money Management
9.	Wealth Building