logo  
Sign in or Register

Already a member?

Sign in

Or sign in with your account on:

Not a member yet?

Register
    

As Sam Sees It: What Happens Post-Shutdown?

By  +Follow October 17, 2013 9:41AM
Share:
Tickers Mentioned:

Each week, we tap the insight of Sam Stovall, Chief Equity Strategist for S&P Capital IQ, for his perspective on the current market.

For more from S&P Capital IQ, be sure to visit www.getmarketscope.com.

EQ: In this week’s Sector Watch report, you discussed how the government shutdown thus far hasn’t seemed to impact the market’s trading volume or volatility based on data going back to 2000 for the month of October. Did this finding surprise you?

Stovall: Actually, I did not really expect to be surprised because we’re only dealing with 10 trading days, which was over a two-week period. So unless we had tremendous spikes upward in either volume or in volatility, or everybody basically staying on the sideline, the numbers that I came up with was pretty much consistent with the volume that we had seen throughout all of 2013, as well as both the volume and the volatility of intraday prices for these 10 trading days in October going back to 2000.

The original question was related to the absence of government-supplied economic data and what could that do to trading patterns, I think investors have been going through a bit of a whipsaw recently because of on-again, off-again agreements between the House of Representatives and the Senate. Still, it was not enough to really make a big change when you are looking at volatility and volume over an extended period.

EQ: Did the headlines coming out of Washington serve as a replacement of economic figures as tradable news, at least for the short term?

Stovall: I would tend to say, “Yes.” That’s a very likely possibility. The volatility that we would have received from daily economic releases was replaced by the daily uncertainty offered by the disagreements between the Democrats and Republicans in Washington. In a sense, what one took away, the other one replaced.

EQ: It’s only been two weeks, but the market has held up quite well thus far. Could we still see a potential pop if/when a resolution is announced soon?

Stovall: We already had a pop last Thursday when the S&P 500 gained more than 36 points, and we saw a pop on Wednesday when the S&P 500 gained by well over 1 percent. So it ends up being a nice little pop.

Will the market jump by more than 10 percent in the month following an agreement that has been established by both houses of Congress? I don’t really think we’re going to see that strong of an advance. We’re heading into the third quarter earnings reporting period, and the most recent estimate was for about a 2.7-percent increase. That’s down from the estimate as of October 1 of 3.4 percent. So either company managements are again doing a good job managing expectations, or we might end up seeing a little bit of a pause in year-over-year earnings growth this quarter. If so, investors will have to wait until early 2014 to become enthusiastic about earnings growth prospects once again.

EQ: Could the market potentially drop following a resolution announcement as traders “buy the rumor, and sell the news?”

Stovall: An immediate-term drop, yes. But something that’s meaningful that would last over several days, probably not. I think it would certainly take away the uncertainty that almost nobody can forecast, and replace it with forecastable uncertainty in the form of economic growth as well as earnings increases.

Let’s face it, valuations today are still appealing while not compelling. The price-to-earnings ratio on trailing 12-month earnings is still at about a 10-percent discount to the median to the past quarter century.

The P/E on projected 12-month earnings is still 8 to 9 percent below what the average has been since this secular bear market started in 2000. It points to a level of 1840 on the S&P 500 to be fair value should we go back to that 16 times projected operating results.

EQ: Earnings season has been largely overshadowed by politics thus far. It’s still early, but the beat rate seems weaker than previous years. Is this a possible cause for concern?

Stovall: With only 54 companies having reported, which is just a shade above 10 percent of the S&P 500 companies, we have a lot more companies to go before I’d get too worried about it. The beat rate usually has been 65 percent and right now we’re finding that 32 of these 54 have beaten estimates. That’s a 59-percent rate, which is less than the 65 percent average, as well as the 67 or 68 percent that we saw last quarter. But I still think it’s very early in the game.

EQ: Telecom is supposed to be the leader for Q3 earnings growth. Once that sector starts reporting in a more meaningful way, do you think that will help to even out the results?

Stovall: The Telecom Services group is expected to show the strongest increase, up more than 25 percent, primarily because Sprint (S) was removed from the index. The Telecom sector has a very small number of constituents to begin with, so removing Sprint leaves us with five or fewer in there. Most of the components are the behemoths of AT&T (T) and Verizon (VZ) , so I would say that you have to look at that 25-percent growth rate with a very big grain of salt because of the exclusion of Sprint having an outsized impact.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


Liked What You Read? Join Equities.com and Connect With Your Favorite Financial Experts FOR FREE! Members of Equities.com gain access to our leading financial news and content, active social investment community, proprietary research tools including the 2014 Small-Cap Stars, E.V.A. reports and more.

Results for S
Donna W. Hill
28 Feb 15 07:45:05
Shame on @Verizon lying ab accessibility 4 $s!Read "Why killing net nutrality will hurt the disabled" #AT #NFB... http://t.co/1CU3bC4YoH
Steve McCulloch
28 Feb 15 07:44:27
RT @pr3sidentspence: @Transport_gc using tax $s to insert govt into people's feeds with'don't do this/that' messages might backfire PR-wise…
Louis Smith
28 Feb 15 07:43:43
@BRICBreaker oddly US financial press is lot less ideological than @TheEconomist @FT. Guess in US they care more about $s than tidy theory
Kathleen Miranda
28 Feb 15 07:38:44
Bring back the talking hamster? $S down 17%, Ouch, Poor Judy Greer, And @marceloclaure,
Stephen Streiker
28 Feb 15 07:34:07
Sprint: It Might Be Time To Buy- Sprint Corporation (NYSE:S) | Seeking Alpha http://t.co/ZygkQpF9JJ via @salphatrending #Sprint #SoftBank $S
 Earl Wayne
28 Feb 15 07:24:59
RT @DogoodII: @Atruetexan @W8 @TheGart @ddogsbbq @AnonEMous1 @GunsmithG @RiverRunMan @HAZELTAZZZ @SoxRule13 Agree 50m would b great start. …
politicsnation
28 Feb 15 07:22:47
@thehill Id rather c u focus on all the tax payer $s gov wastes every year. That's the real problem.
Penny Stock Secret
28 Feb 15 07:15:28
Yesterday We Made $89,000 In Just One Trade More Info Here http://t.co/NovWYe2RAx .. $PCAR $CTAS $S $ODFL
Russell Barbour
28 Feb 15 07:13:14
http://t.co/fmOyM2xelz <--- Amazing subscriber to Super_Trades - check out his profit chart!! $ZNGA $SIRI $S $ONVO $LQMT $KWK $CNET
Silence Dogood II
28 Feb 15 07:12:29
@Atruetexan @W8 @TheGart @ddogsbbq @AnonEMous1 @GunsmithG @RiverRunMan @HAZELTAZZZ @SoxRule13 Agree 50m would b great start. Less $s 4 Liars
Muathe
28 Feb 15 07:11:15
[VIDEO] Weekend Market Analysis 02/28/2015 $AAPL $XOM $EYES $AMAT $SWN $AES $ABX $TWTR $AIG $JPM $DAL $MDRX $NBG $S http://t.co/FmMrPAGSO9
Ken Kuechler
28 Feb 15 07:07:38
@ClaytonMorris Few $s go to my disabled daughter. I wrote memoir for our country. Please read it. In USSR from 77- 82.
ATHLETES FOR CHARITY
28 Feb 15 06:57:29
@binghamtonu @binghamtonalum Let's help Bingo students/members of Theta Tau raise $s to deliver books to kids: http://t.co/Ags6t92fa8
Dave Jensen
28 Feb 15 06:41:46
Costs are NOT represented by $s only! How Much Does Illegal Immigration Cost You? - AMAC, Inc. http://t.co/pF5zLoinkA via @sharethis
Meditate
28 Feb 15 06:39:31
RT @ShugdenLibrary: Millions of US taxpayer $s are being pumped into the exile Tibetan community - https://t.co/UBuN9JMejp #DalaiLama http:…
DAVE ROSA
28 Feb 15 06:19:18
giving 5 million illegals social security $s is crazy.....if you want to make the "guest workers" then you can... http://t.co/yl9mdJX7lZ
Breaking News
28 Feb 15 06:14:03
$VZ $S $GOOGL: Internet Providers Not Happy with New regulations passed by FCC ...: http://t.co/06FwYBSmlM
Diane Cadman
28 Feb 15 06:10:38
RT @DalaiLamaTruth: Millions of US taxpayer $s are being pumped into the exile Tibetan community - https://t.co/URsnuSFG5m #DalaiLama http:…
StockNewsWires
28 Feb 15 06:06:07
$S $CLWR: Sprint Corp (NYSE:S) all set to improve its network: http://t.co/tW9C22e4h3
Stockaholics
28 Feb 15 06:05:52
Our Penny Stock Picks Gained Over 342% In 2 weeks! Get Our Next Alerts Early: http://t.co/iPnInrsUzz $PCAR $CTAS $S $ODFL
Jerry Puckett
28 Feb 15 05:51:41
@DavidJWhite858 @TheDemocrats Right, @TheDemocrats may lose some of us (from this mess) come 2016 too in $s
TX Awesome
28 Feb 15 05:50:08
@FoxNewsInsider @PeteHegseth @ShannonBream Proud of how those tax $s are being spent??? @StateDept
Kendra Fernandez
28 Feb 15 05:29:33
Bring back the talking hamster? $S down 17%, Ouch, Poor Judy Greer, And @marceloclaure,
Black Swan
28 Feb 15 04:50:54
@charken4 this is to justify future space flights, to keep funding flowing into space programs in the billions of $s
FonsieTrader
28 Feb 15 04:27:26
Trade Ideas for Monday 02 $AMCC $ALGN $IBIO $DCTH $VRA $HOV $S $CYBR $ATVI $DHI http://t.co/inI51xh7wu #traders #stocks #trading #options
Kelsang Wangchog
28 Feb 15 04:07:23
RT @ShugdenLibrary: Millions of US taxpayer $s are being pumped into the exile Tibetan community - https://t.co/UBuN9JMejp #DalaiLama http:…
Helen Stokes
28 Feb 15 03:52:18
@DavidJWhite858 @TheDemocrats Right, @TheDemocrats may lose some of us (from this mess) come 2016 too in $s
FREEMAN
28 Feb 15 03:34:12
RT @linmitdan: Containers found 4kms deep on seabed give boost #MH370 hopes? No more $s for search - our taxes. Cost in $s to date? @deanhe…
Life's Good
28 Feb 15 03:31:41
Containers found 4kms deep on seabed give boost #MH370 hopes? No more $s for search - our taxes. Cost in $s to date? @deanhepburn @ozpsych
Belinda Ray
28 Feb 15 03:29:17
Bring back the talking hamster? $S down 17%, Ouch, Poor Judy Greer, And @marceloclaure,
Beverage Consulting
28 Feb 15 03:28:53
RT @theflynews: Notable companies reporting after market close $MNST $ROST $GPS $ADSK $UHS $SWN $ESV $JCP $NMBL $HLF $MDRX $S... http://t.…
Silence Dogood II
28 Feb 15 03:18:31
@Dbargen @Dc37Deborah @Mathiasian #msmAdBoycottTeam STEP 4: Lots to FIX NOW! and Less Ad $s 4 Liars Do You Agree? TY http://t.co/OleZCgFwDR
Silence Dogood II
28 Feb 15 03:17:45
@Dbargen @Dc37Deborah @Mathiasian #msmAdBoycottTeam STEP 3: Fraud & Treason and Less Ad $s 4 Liars Do You Agree? TY http://t.co/nfOh3A6GVU
viivi virver dharma
28 Feb 15 03:17:04
RT @ShugdenLibrary: Millions of US taxpayer $s are being pumped into the exile Tibetan community - https://t.co/UBuN9JMejp #DalaiLama http:…
Silence Dogood II
28 Feb 15 03:16:53
@Dbargen @Dc37Deborah @Mathiasian #msmAdBoycottTeam STEP 2: MSM Lying for 6+ Yrs Less Ad $s 4 Liars Do You Agree? TY http://t.co/IcT0aiVTUR
Religious Freedom
28 Feb 15 03:03:31
RT @ShugdenLibrary: Millions of US taxpayer $s are being pumped into the exile Tibetan community - https://t.co/UBuN9JMejp #DalaiLama http:…
Silence Dogood II
28 Feb 15 02:56:44
@jjauthor Hi Janie Tryin again #msmAdBoycottTeam STEP 4: Lot's to FIX NOW. UNITE! Do You Agree? Less Ad $s 4 Liars TY http://t.co/OleZCgFwDR
Silence Dogood II
28 Feb 15 02:55:24
@jjauthor Hi Janie Tryin again #msmAdBoycottTeam STEP 3: Fraud & Treason! Do You Agree? Less Ad $s 4 Liars TY http://t.co/nfOh3A6GVU
Silence Dogood II
28 Feb 15 02:54:33
@jjauthor Hi Janie Tryin again #msmAdBoycottTeam STEP 2: MSM Lying for 6+ Years Do You Agree? Less Ad $s 4 Liars TY http://t.co/IcT0aiVTUR
Rev. Chris Ward
28 Feb 15 02:49:38
@gadaboutssnore Well, there's infrastructure. I think ppl should focus on the misallocation of tax $s "trickling up". #incomeinequality
Breaking News
28 Feb 15 02:46:02
$S: Sprint: It Might Be Time To Buy (S): http://t.co/9OwL6aoPSt
ingrid majer
28 Feb 15 02:29:16
RT @ShugdenLibrary: Millions of US taxpayer $s are being pumped into the exile Tibetan community - https://t.co/UBuN9JMejp #DalaiLama http:…
Silence Dogood II
28 Feb 15 02:22:53
#msmAdBoycottTeam 50m Patriots Needed! STEP 2: MSM Lying 6+ Yrs. Do YOU Agree? Less Ad $s 4 Liars LikeSTEP2Video&Join http://t.co/IcT0aiVTUR
evie home
28 Feb 15 02:14:24
RT @ShugdenLibrary: Millions of US taxpayer $s are being pumped into the exile Tibetan community - https://t.co/UBuN9JMejp #DalaiLama http:…
Shugden Library
28 Feb 15 02:13:41
Millions of US taxpayer $s are being pumped into the exile Tibetan community - https://t.co/UBuN9JMejp #DalaiLama http://t.co/YIktv3QFG1
D. Owen
28 Feb 15 02:02:35
RT @theflynews: Sprint CEO discloses 5.08M share purchase $S: Full Story http://t.co/GOOvzGxww7
Pzaa...Guy
28 Feb 15 02:01:15
$S - Sprint: It Might Be Time To Buy http://t.co/oKO4D8Nmkx
The Cardiac Kid
28 Feb 15 02:01:13
$S - Sprint: It Might Be Time To Buy http://t.co/Ubg3BQJ84M
john smith
28 Feb 15 02:01:11
$S - Sprint: It Might Be Time To Buy http://t.co/8PhR8Y1CY3
NASDAQ
28 Feb 15 02:01:09
$S - Sprint: It Might Be Time To Buy http://t.co/QyMJO4EdTK
				
				
By  +Follow October 17, 2013 9:41AM
Share:

Comments

 

blog comments powered by Disqus

About us

Equities.com is the most advanced interactive online social ecosystem for the financial industry, serving as a resource center and next-generation communication platform that connects self-directed investors with public issuers, market experts, and professional service providers and vendors. Registered members can leverage our exclusive proprietary research tools such as the Small-Cap Stars, which outperformed 90% of all small-cap mutual funds, and robust do-it-yourself E.V.A. research reports. The Equities.com Issuer Dashboard is the ideal tool to communicate and manage investor awareness campaigns to the investment community, as well as to access valuable resources to help your company grow.

Market Data powered by QuoteMedia.
Copyright © QuoteMedia. Data delayed 15 minutes unless otherwise indicated. Terms of Use.