Thank you for completing my survey! I value your input and will take your answers into consideration for future blog posts. As promised, here are my predictions for the rest of 2015:
By the end of 2015, I expect the S&P 500 to be…
Answer: Higher than it is right now.
At the time of writing this, the benchmark index is off 7% from where it started the year. The main culprit is the strong U.S. dollar, which has been squelching the sales of large multi-international companies and squeezing their underlying earnings. And given that about half of the S&P 500’s sales are from outside of the U.S., any sales momentum in the S&P 500 has been effectively crushed. The upcoming third-quarter earnings season will be no exception (more on that in a moment).
However, there are other seasonal trends that bode well for the broader market (which I’ll cover towards the end of this blog post. So, while there may be a few more retests over the next few weeks, I do expect the market to eventually get its footing and move higher by year-end.
I expect third-quarter earnings season to have a…
Answer: Negative impact on the broader stock market, but a positive impact on my holdings.
I expect third-quarter earnings season to be tough for the broader market, but good for a select number of stocks. Allow me to explain.
With negative sales growth, it is growing increasingly harder for many stocks in the S&P 500 to generate tremendous earnings growth. As a result, many of these companies now have negative forecasted annual earnings growth, too. So, the S&P500 is in trouble this earnings season, with FactSet calling for a 4.5% earnings decline and a 3.3% sales decline.
There is clearly a major problem on the sales and earnings front for many large multi-international corporations, and only a few mega-cap stocks are now worth investing in. So there is now a “seismic shock” rumbling through the S&P 500 that will have profound consequences for the overall stock market. A massive flight to more domestic stocks with real sales and earnings growth is now underway.
I covered a few of these "analyst darlings" in a recent blog, and readers of my various Navellier newsletters have access to several dozen other companies that are expected to do well this earnings season.
True or false: I see recent market bullacks as a buying opportunity.
As I mentioned earlier, I expect the current market volatility to be short-lived. The seasonally strong time of year is finally approaching. Market momentum tends to pick up in October and then accelerate even more in November, especially as we approach the Thanksgiving holiday.
As the Thanksgiving holiday approaches, the national mood typically rises because we are gathering with family and friends for food, football and fun. And those good feelings seem to rub off on the stock market. When consumers are happy, typically investors are also happy.
I expect this good cheer to linger through Christmas, and the New Year. So I do see any near-term pullbacks as buying opportunities, provided that you’re focusing on the right stocks. More on that now.
For the rest of 2015, my biggest investing concern is:
Answer: All of the above.
All investors should be keeping tabs on the eventual rate hike, the stronger U.S. dollar, China’s slowing economy and plunging oil prices. Each of these forces is exerting pressure on the stock market. However, amidst the uncertainty, there are pockets of relative strength that are worth focusing on.
These include stalwart domestic companies, especially those tied to the U.S. housing recovery and the resurgence of the American consumer. Other signs to look for in potential stocks to buy are robust stock buyback programs, consistent dividend growth and double-digit sales and earnings growth. In this daily blog I’ll continue to highlight those buying opportunities, and to my newsletter subscribers out there, you have 24/7 access to a Buy List that’s chock full of strong buys.
In summary, there’s a lot to look forward to as we finish up 2015.
Thank you again for participating!