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Perspectives from Above the Noise -- Week of October 31st, 2016

| October 31, 2016
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economy; Perspectives

U.S. stocks ended lower four out of the five trading session last week, culminating in Friday’s reversal after the FBI was rumored to be reopening the investigation into Hillary Clinton’s use of an unauthorized email server. In a letter to Congress, FBI Director James Comey said additional Clinton-related emails were discovered during a separate investigation of Clinton aide Huma Abedin’s estranged husband, former Congressman Anthony Weiner (NY, D). Bonds rose, while the US dollar weakened, as did the odds for a Federal Reserve rate hike this year. Equities had earlier traded higher on enthusiasm over a preliminary reading of third quarter GDP growth came of 2.9%, the fastest pace of economic expansion since mid-2014.

For the week, the S&P 500 fell -0.67%, its fourth weekly loss, the Dow Industrials inched up +0.9% and the MSCI EAFE (developed international) retreated -0.39%.

What We’re Reading

Comey’s FBI October Surprise -- CNN

Eurozone 3Q GDP Holds Steady, Up 0.3% -- NY Times

Chart of the Week: Earnings Review: Large Caps Reporting Best

With the third quarter 2016 earnings season about halfway complete, a review by Credit Suisse shows that 79% of S&P 500 large cap equities, 71% of Russell mid caps and 68% of Russell 2000 small caps have surpassed analysts’ consensus earnings per share (EPS) estimates. Whatsmore, 60% of respective large caps, 50% of midcaps and 54% of small caps have beaten analysts’ consensus revenue estimates. Please note that results are still preliminary and may change as more companies report results.

For large caps, EPS and sales “beats” still look strong relative to history. As the Figure 5 chart (above) shows, EPS beats are up from last quarter and are near 2014 highs. Large cap sales beats, as conveyed by Figure 6, have come in a bit over the past week, but are still very strong relative to last reporting season. Small and mid cap results are more mixed. Small cap EPS beats are up from last reporting season, but midcap EPS beats, midcap sales beats and small cap sales beats are down slightly.

Some materials are chosen by the Cetera Investment Management team and summarized by Jason Vitucci who is not affiliated or registered with Cetera. Cetera Investment Management provides investment management and advisory services to a number of programs sponsored by First Allied Securities and First Allied Advisory Services. Cetera Investment Management individuals who provide investment management services are not associated persons with any broker-dealer. International investing involves additional risk, including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. Investing in companies involved in one specified sector may be more risky and volatile than an investment with greater diversification.

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