S&P Loses 2% On Week But Data and Earnings Largely Positive

The S&P 500 closed last Friday at 3,841.47 and closed at 3,714.24 this afternoon. This was the worst weekly performance since October’s pre-election jitters. It was certainly a wild week on the street. All and all though, when we look at the data and earnings, we are still convinced of our base case; stocks will consolidate in a mid-bull market correction down to around the 3,500 level for the S&P before resuming their upward trend and finishing the year significantly higher than current levels. Of the 154 companies that have reported so far 82% are beating earnings estimates by a median of 13%. On the top line, 78% are beating by an average of 9%. We’re going into the new year with a fresh rise in household income and savings.

Do we think anything that happened this week suggests a watershed moment marking the beginning of a bear-market? Certainly not. We find elevated retail participation to be generally a good thing. More buyers and sellers ultimately should mean better markets. One thing that we think is incredibly important is to listen to markets and the very definitive language they speak in: price. Shouting at the market can end up being a rather expensive habit; best to stick to slogging it out on the links.

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