Key Points:
S&P 500 Earnings
Expected to decelerate to 4% median earnings growth. Sales expected to be flat from Q1 at 4%. This would tie with Q1 2019 for the slowest sales growth since Q4 2016 and would be the slowest earnings growth since Q1 2016.
However, we expect a normal beat of 3-4%. The bigger key will be to see if the trend in downward revisions after earnings comes to an end. Forward earnings have been consistently revised lower since September 2018.
Into the beginning of the season, the VIX is low, at 13, and investor advisors are skewed bullish, at 53%, although not extreme (60%+).
Given a falling 10-year bond yield (historically inverse relationship with market P/E ratio), the market multiple should expand. Unless forward earnings are much worse than expected, this could fuel a push further into all-time highs.
Index/Sector/Stock Trends
Major indices are at or within 1% of all-time highs, as are six of 11 sectors (Utility, Staple, Retail, Financial, Tech, Cap Equip).
Growth stocks are acting well. Our Focus List count of 63 is well above the long-term average of 50.
There are however, more extended names than actionable names on our Focus List. The most extended are COUP, VEEV, CYBR, TEAM, PLNT, NOW, GLOB, and EEFT.
The actionable list includes AMD, COLD, EW, VIAV, DIS, and ILMN.
